The character and kind of investments which may be made by the trustee depend on the investment parameters set forth in the UITF Declaration of Trust or Plan Rules. BSP regulations, however, prescribe that UITF fund investments shall be limited to: (a) Bank deposits (b) Securities issued by or guaranteed by the Philippine government or the BSP (c) Tradable securities issued by the government of a foreign country, any political subdivision of a foreign country or any supranational entity (d) Exchange listed securities (e) Marketable instruments that are traded in an organized exchange (f) Loans traded in an organized market and (g) Such other tradable investments as the BSP may allow.
A list of prospective and outstanding investment outlets of the fund shall be made available to the clients as part of the disclosure requirements for UITFs. The list of investment outlets shall be updated quarterly.
The trustee shall charge the fund for management fees, taxes and qualified expenses. The management fee shall differ for each type of fund and will cover the costs of investment research, management, marketing and routine administrative expenses of the trustee.
The Declaration of Trust of a UITF may be amended by a resolution of the Board of Directors of the trust entity provided that participants in the fund shall be immediately notified of such amendments. Clients who are not in conformity with the amendments shall be allowed to withdraw their participants within a reasonable time but in no case less than thirty calendar days after the amendments are approved.
The trustee shall submit the amendments to the BSP for approval, within ten business days from approval of its Board of Directors. Said amendments are deemed approved by the BSP after thirty (30) business days from date of completion of requirements.
A client investing in a UITF product should be prepared to absorb the following potential risks: (a) interest rate risk – the potential for an investor to experience losses due to changes in interest rates; (b) market/price risk – the potential for an investor to experience losses due to changes in the market prices of securities (e.g. bonds and equities); (c) liquidity risk – the inability to sell or convert assets into cash quickly or where conversion to cash is possible but at a loss; and (d) credit risk – the risk of loss due ta borrower or issuer's failure to repay principal and/or interest on securities issued.
Because the assets of the UITF are valued based on the prevailing market prices, yields and potential yields cannot be guaranteed. There is a possibility of incurring losses in the UITF if the client withdraws in a scenario of generally declining market prices, even if the fund is invested in government securities. It should be noted that investments in government securities, although considered credit risk free in the domestic market are also subject to interest rate risk, market risk and under extreme volatile conditions, to liquidity risk. Should this situation arise, clients may, however, opt to defer their withdrawals until market conditions become more favorable.
Being a trust product, there is no guaranty on the principal and income of the investments and losses, if any, shall be for the risk of the UITF investors. UITFs are governed by BSP regulations but are not deposit products, hence are not covered by the Philippine Deposit Insurance Corporation (PDIC). Historical performance of a fund may be used for reference purposes only and do not guarantee similar future results.
Investors in UITFs can avail of the following benefits: