Unit Investment Trust Fund Frequently Asked Questions

Q. What is a Unit Investment trust Fund (UITF)?

A. A Unit Investment Trust Fund (UITF) is an open-ended pooled trust fund denominated in any acceptable currency. A UITF is operated and administered by a trust entity. Funds from various client investors are pooled together by the trust entity and invested in different types of investment instruments and securities by the trustee with the objective of providing the client investor maximum returns that is commensurate to the level of risk that is embedded in the trust investment portfolio.

Q. What is the advantage of pooling funds together?

A. By pooling the funds together in a UITF, a client investor is able to participate in the achievement of the fund on economies of scale. Funds have access to better yields on their investments given the size of the fund. Furthermore, the size of the funds will allow efficient diversification of investments, which is an important factor in making prudential investments. By investing the pool of funds in various types of securities, it limits the risk that each investment outlet brings to the overall UITF portfolio. Such investment strategy is reflected in the decrease in the high volatility of investment returns. All these benefits may be achieved in a UITF.

Q. What are the types of UITF’s available in the market?

A. There are different types of UITF’s that client investors may choose from. Each type of UITF has a set of investment parameters and risk level. The common types of UITF funds in the market, among others, are:

  • Money Market UITF: The fund is primarily invested in money market debt instruments with short term maturity. Due to the nature of its investment outlet there is a low probability of deviating from the expected returns.
  • Fixed Income UITF: The fund is primarily invested in fixed-income debt instruments, eg. government securities and corporate bonds. Investment securities have a longer term to maturity. As such, the fund will have a higher expected return but, also, have a higher probability of deviation from expected returns.
  • Balance UITF: The fund is invested in a mix of fixed income debt securities and equities. It aims to generate additional returns from potential gains on equity investments that are listed in the stock exchanges. The expected return is higher relative to a pure fixed income UITF. However, the degree of deviations from expected return is also higher.
  • Equity UITF: The fund is primarily invested in equities that are listed in the stock exchanges. It has the highest expected return among the UITF’s available in the market, and also has the highest degree of deviations from the expected return of the fund.

Q. How do I participate in a UITF?

A. Participating in a UITF is similar to investing in shares of stocks of a corporation in the stock exchange. You participate in the fund by purchasing units from the Trust Division, in exchange for cash, of a specific UITF at the prevailing unit price for the day. The unit price or price per one (1) unit of a UITF is called the Net Asset Value (NAV) per unit of a UITF. The NAV per unit is the price at which investors purchase or redeem units from the fund.

Q. How do I earn? Is the return guaranteed?

A. Investment in a UITF does not guarantee a rate of return. The UITF follows a valuation methodology that is used by the whole Trust Industry and is a requirement by the Bangko Sentral ng Pilipinas (BSP), called mark-to-market (MTM) valuation. The MTM procedure revalues all the investments of the fund daily based on the price of the tradable debt investment security in the financial markets. The NAV per unit or unit price of the UITF changes daily depending on the movements in the prices of the underlying investment that the fund is invested in. As the NAV per unit of the fund increases or decreases, so does the value of the units you bought. Your actual rate of return will depend on the performance of the underlying investments of the fund and the skill of the people managing the investment securities of the fund.

Q. Is there a cut-off time for investments and withdrawals?

A. All investments and withdrawals should be made before 12 noon of a banking day through your depository branch. Redemptions are subject to a settlement period. For more details on the redemption settlement periods, please click the link below:

http://eastwestbanker.com/info/ifundsfeatures.asp

Q. Since UITF investments are not insured with the PDIC, does that mean that if your bank closes I will also lose my entire investment?

A. By BSP regulation, trust assets are kept separate and distinct from the Bank’s. Therefore, in the unlikely event that East West Bank should close, all trust assets, including UITF assets, cannot be touched by its creditors. You will still be able to withdraw the market value of your entire investment.

Q. Can I instruct the Trust Division to invest my UITF investment in specific instruments?

A. No. You are participating in a pooled-fund and the Trust Division has full discretionary powers in investing the commingled funds of UITF investors. However, the Trust Division must abide by the investment parameters stated in the Declaration of Trust of the funds which were duly approved by the Bangko Sentral ng Pilipinas (BSP).

Q. What happens if the value of my investment in the future falls below the required initial investment?

A. No penalties will be charged. The minimum investment only applies to your initial investment. It is not your fault should your investment decrease in value due to movements in the market prices of the underlying investments of the funds.

Q. Will I know the underlying investments of UITFs?

A. Yes. These are shown in the Key Information and Investment Disclosure Statements (KIIDS), which are available in the bank’s website, www.eastwestbanker.com and is updated quarterly.

Q. How do I monitor my investment?

A. The Key Information and Investment Disclosure Statements (KIIDS) are available in the bank’s website. You may also request for your fund statement from the Trust Division through your depository branch. The daily NAV per unit and other fund information are also available on our website at www.eastwestbanker.com and the UITF website at www.uitf.com.ph.


For more information on Infinity Funds, contact the EastWest Bank branch nearest you.

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