From a blog inquirer: “Interesado po ako na mag-invest sa sinasabi ninyo na UITF sa bangko. Pero madami na po akong nabalitaan na mga bangko na nagsarado. Hindi po ba ako mahirapan na kunin ang pera ko kung sakaling magsarado ang bangko na pagkukuhanan ko ng UITF?”
One of our favorite investment vehicles in the Philippines are the UITF’s or unit investment trust funds. This type of bank product that allows the bank’s clients and other investors to avail of affordable pooled funds that are invested in various financial instruments. However, these are not insured by the Philippine Deposit Insurance Corporation or PDIC.
So if and when a bank goes bankrupt and its owners decides to close it down, your investment in their UITF product will also become part of the history, right?
Circular No. 653 of the Bangko Sentral ng Pilipinas states that trust assets are kept separate and distinct from the Bank’s.:
Section 1. Amendments to the Manual of Regulations for Banks (MORB).
(1) Section X421 Books and Records and Subsection X426.2 External Audit of the MORB are hereby amended to read as follows:
(a) Section X421 Books and Records
“The bank’s trust department or investment management department shall keep books and records on trust, other fiduciary and investment management accounts separate and distinct from the books and records of its other businesses and shall follow the Financial Reporting Package for Trust Institutions prescribed by the BSP.”
Therefore, in the unlikely event that a bank closes, UITF assets, cannot be touched by its creditors. Investors like you will still be able to withdraw the market value of your entire investment in UITF’s.
But having a big bulk of your cash invested in UITF’s is better than leaving them all in a savings or time deposit accounts as PDIC can only guarantee up to P500,000 of your savings. Well, you should be thankful to your previous President GMA for raising the maximum deposit insurance for bank deposits from P250,000 to P500,000 back in June 1, 2009 under R.A. 9576. 😉
Again, you will not lose your investment even if the bank closes. However….
Is the return in UITF investments guaranteed?
Of course, before redeeming your proceeds, make sure that the market is up and jumping, especially if you invested in an equity/stock type UITF. Otherwise, you will either be redeeming less than what you invested or your profits not maximized.
Investment in a UITF does not guarantee a rate of return. 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 value of the units bought increases or decreases as well. The 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. Remember the differences and similarities between UITF’s and mutual funds?
As a final reminder, investors should always take a closer look first and analyze the investment vehicle being offered to them before entrusting their money to brokers or fund managers.
Study first before investing.
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P.S. 1. Bro. Bo Sanchez has appointed me as a coach for our young and new investors at the TrulyRichClub social site. It’s a fun, learning family with the purpose of “helping good people become rich”. I’m inviting you to join the TrulyRichClub too and email me at firstname.lastname@example.org if you have any questions. Click here to join!
Photo credit: Jun Acullador
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