The Meaning of UITF and its Financial Opportunities

Today’s world of finance and investment offers more opportunities for financial growth to the public. With innovations in financial systems and services, there are more bank investment options available for your unique monetary goals. And through the availability of the UITF products in the Philippines, you can secure your financial growth for the future.

So, What is a UITF?

A Unit Investment Trust Fund (UITF) is a type of investment pool that distributes your investments in a portfolio of securities like stocks, bonds, or money market instruments. These investments are managed by professional fund managers, and you––as an investor––can purchase units in a UITF to invest in your preferred portfolios.

To better understand UITFs, here’s a breakdown of its features:

Unit Ownership

When you invest in a UITF, it’s not simply putting your money in an account and letting it grow over time. Here, you purchase "units" that represent your participation in the fund, and these units are then invested into your chosen portfolio of securities.

But, how much do these units cost? The value of each unit is determined by the Net Asset Value per Unit (NAVPU). It’s calculated daily based on the fund's assets and liabilities. 

So, let’s say you want to invest ₱10,000 in UITF “A” and its NAVPU is 1.3. 

To compute:

10,000 ÷ 1.3 = 7,692.31

This means you have now bought 7,692.31 units and can invest them in UITF “A.”

Diversification and Risk Tolerance

UITFs provide you with diversification benefits because the funds pool their capital from various investors and invest the money into a variety of assets. This helps spread out risk and reduce the impact of individual asset performance on the overall investment.

Before you start investing, financial advisors ask about the level of risk tolerance you’re willing to take with your money. When investing in UITFs, you undergo a Client Suitability Assessment (CSA) to find out your investment profile. This investment profile will then determine which UITFs are suitable for you. Below are the three types of investment risk profiles:

• Conservative profile: Conservative investors prefer to invest in highly liquid investments which have lower chances of losing their capital. Examples of these investments are Government Securities and Money Market Funds.

• Moderate profile: Moderate investors are a bit more comfortable with riskier investments and want a potential return that is higher than traditional deposit products. These investors are more willing to expose their funds to a certain level of risk for the possibility of higher returns. Some examples of these investments are Corporate Bonds and Fixed Income Funds. This profile is considered a balanced financial strategy.

• Aggressive profile:  Aggressive investors prefer a portfolio that can lead to higher returns and acknowledge the higher risks return volatility and even possible loss of investment capital. Examples of these investments are stocks and Equity Funds.

If you’re new to investing, knowing your investor profile via the CSA can help you understand your risk tolerance for investments and comfortably invest in suitable asset classes. Alongside diversifying your investments, these can help you achieve financial stability and growth.

Professional Management

Experienced fund managers make investment decisions on behalf of UITF investors. These professionals conduct research, analyze market conditions, and select securities to optimize returns within the fund's investment objectives.

Financial advisors and fund managers have continuous training, meetings, and seminars to keep up with market changes and innovations. So, if you’re unsure about the type of investment you need based on your circumstances, you can consult with a trusted fund manager.

Liquidity

UITFs typically offer daily liquidity, meaning you can buy or sell units on any business day. However, its orders are usually settled within 1-4 business days. Aside from this, the value of the units is dependent on the NAVPU at the time of your investment or redemption.

It’s important to keep in mind that UITFs have varying rules. Some investment streams can require you to keep your units in their investment pool for at least a month before you can sell units. Be sure to learn about these details so that you’re aware of when you can liquidate your investments. As for RCBC, all our UITFs have no minimum holding period, so clients are guaranteed this increased liquidity. 

Minimum Investment

Each UITF has a minimum initial investment requirement. This varies depending on the fund and the financial institution offering it. The usual minimum amount can be as low as ₱5,000 to ₱15,000. 

Once you’re a recurring investor, the required additional investment amount can change and be as low as ₱1,000.

Fees and Taxation

Like most transactions, there are fees associated with UITFs, including management fees and other charges. These fees are typically deducted from the fund's assets and are reflected in the NAVPU. 

Also, in the Philippines, gains from UITF investments can still be taxed. The tax treatment may vary depending on the type of UITF and the holding period.

Ask your fund managers for a breakdown of the fees and taxes of the funds to have complete transparency over your investments.

UITF vs. Mutual Fund

Now, you may be wondering “What’s the difference between investing in shares and UITF units? Aren’t those two funds the same?”

This is a popular misconception among new investors and it’s totally understandable! There are a lot of similarities between UITFs and Mutual Funds which is why it’s common to interchange them. Exploring their differences is important to fully appreciate how UITFs function.

Mutual funds, like UITFs, pool money from multiple investors to allocate capital in various assets such as money market securities, government securities, stocks, and more. So what’s the difference between UITFs and Mutual Funds?

UITFs are offered by banks with trust licenses and trust corporations, governed by the Banko Sentral ng Pilipinas (BSP). Mutual funds, on the other hand, are governed by the Securities and Exchange Commission (SEC).

Buying Mutual Funds is similar to buying stocks since Mutual Funds are investment companies where you buy “shares”. Investors who own shares in Mutual Funds become shareholders, which makes them part-owners of the Mutual Fund—similar to investors of stocks. On the other hand, UITFs are more like contracts between two parties. UITF investors purchase “units” as part of their participation in the UITFs, which are bank products (and not investment companies like Mutual Funds). 

By recognizing this key difference, you gain a clearer picture of what the UITF is and why it’s another popular investment stream to explore.

How Do RCBC UITFs Work?

Now that you know more about what UITFs are, let’s explore the features of RCBC’s UITFs to get a better picture of how you can invest with our bank.

In RCBC, we act as the trustee and fund manager of the various UITFs we offer. These funds are designed with specific investment objectives, asset allocation strategies, and risk profiles in mind. As an investor, we assess your financial goals and risk tolerance before we recommend which type of UITF in RCBC fits your needs.

Once you’ve invested your money in RCBC's UITF, our team of experienced fund managers invest on your and other investors’ behalf. They collate all your goals and needs and make informed decisions on which portfolios to invest in. Afterward, we create reports that allow you to track the progress of your investments.

Types of RCBC UITFs

RCBC offers a variety of UITFs you can choose from. As mentioned earlier, these types of portfolios were specifically designed for different types of investors to match their financial objectives. 

At the moment, RCBC has 11 types of UITFs:

• 1. RCBC Peso Short-Term Fund

The RCBC Peso Short-Term Fund is heavily invested in government securities. So, if you have a small amount saved up and don’t need it in the next few months, investing in this fund can be an option. That way you can let your money grow instead of leaving it to earn smaller returns in your savings account. This UITF was designed with new and conservative investors in mind.

The minimum initial investment for this fund is ₱5,000 and any additional should be at least ₱1,000. And since this is a short-term fund, it doesn’t have a minimum holding period.

• 2. RCBC Peso Money Market Fund

Like the RCBC Peso Short-Term Fund, the Money Market Fund is a short-term investment. Assets here are allocated to short-term fixed-income securities mostly in government securities, with the remainder in corporate bonds and time deposits. This type of investment is also for new investors, but they’re made for those who want higher returns than traditional deposits.

The minimum investment for this fund is the same as the Peso Short-Term Fund. The difference is that the trust fee of the Peso Short-Term Fund is at 0.25% p.a, while the Money Market Fund is at 0.50% p.a.

• 3. RCBC Peso Cash Management Fund

If you’re a new investor and want to keep your investments liquid, the RCBC Peso Cash Management Fund is an ideal portfolio for you. Here, your investment is put into short-term fixed-income securities like time deposits to potentially gain high returns.

The Peso Cash Management Fund’s investment parameters are the same as the Peso Short-Term Fund, including the 0.25% p.a trust fee. There’s no minimum holding period, meaning you can keep your funds invested in just a few months before liquidating.

• 4. RCBC Dollar Money Market Fund

Much like the RCBC Peso Money Market Fund, the Dollar Money Market Fund is invested in short-term fixed-income securities denominated in US Dollars. The minimum initial investment here is $200 with a minimum of $100 per additional investment. 

• 5. RCBC Peso Fixed Income Fund

The RCBC Peso Fixed Income Fund is best if you want to achieve medium-term goals like saving up for a vacation, house renovations, or maybe a car. This fund invests in long-term fixed-income securities like corporate bonds and government securities. 

Like the previous funds, the minimum initial investment is ₱5,000 with no holding period. This UITF is perfect if you intend to keep your money invested for three to five years and are willing to take moderate risks for potential capital growth.

• 6. RCBC Dollar Fixed Income Fund

The RCBC Dollar Fixed Income Fund is the counterpart of the Peso Fixed Income Fund, but in US dollar denomination. And like the RCBC Dollar Money Market Fund, the minimum initial investment is $200 with a $100 minimum investment for additional unit purchases.

• 7. RCBC Multi-Asset Fund

If you’re looking for an investment that’s a bit riskier than our RCBC Fixed Income Funds and has a potential for higher returns, the RCBC Multi-Asset Fund might be the ideal investment for you.

This UITF invests in both fixed-income securities and in stocks of companies listed on the Philippine Stock Exchange (PSE). Ideally, this fund is for long-term growth, meaning you intend to keep your assets in the investment portfolio for at least five years with a moderate risk tolerance.

The initial minimum investment in the Multi-Asset Fund is still ₱5,000 with a 1.00% p.a. trust fee.

• 8. RCBC Equity Fund

The RCBC Equity Fund is a high-risk investment created for more experienced investors. Your investment in this fund is invested in stocks of companies listed on the PSE. 

So, if you want to take higher risks in building your long-term financial goals, investing in the RCBC Equity Fund can be beneficial to you. You can use the returns for your retirement or to fund your familial needs in the future.

The minimum initial investment for the Equity Fund is the same as the Multi-Asset Fund at ₱5,000. 

• 9. RCBC R25 Dividend Equity Fund

With the RCBC R25 Dividend Equity Fund, RCBC’s fund managers use an algorithm to invest in stocks of the top 25 most actively traded and largest companies listed on the PSE. This formula chooses businesses that historically yield high dividends for potentially higher returns.

Like the RCBC Equity Fund, this fund is best for experienced investors willing to take higher risks and want to invest long-term for future financial security.

The investment parameters of the R25 Dividend Fund Equity Fund are the same as the RCBC Multi-Asset Fund.

• 10. RCBC R25 Blue-Chip Equity Fund

Investing in the RCBC R25 Blue-Chip Equity Fund is similar to the R25 Dividend Fund Equity Fund. Their difference is that the RCBC Blue-Chip Equity Fund doesn’t necessarily prioritize investing in historically high-yielding companies. This fund focuses more on the 25 most actively traded companies on the PSE.

• 11. RCBC US Equity Index Feeder Fund

If you want to gain possible capital growth and global diversification by investing in companies like Google, Amazon, and Apple, the RCBC US Equity Index Feeder Fund is the best investment fund for you. 

This UITF invests a minimum of 90% of its funds in the top companies listed in the S&P 500 index by investing in iShares Core S&P 500 ETF, managed by Blackrock Fund Advisors—which is an investment company in the US. It’s ideal for long-term and experienced investors who are willing to take higher risks for potentially higher returns. 

The investment parameters of this fund are the same as the R25 Funds save for the 0.75% p.a. trust fee on top of BFA’s 0.03% management fees.

For an overview of RCBC’s UITF, you can check out the comparative grid on our website. And if you still have questions about which type of fund fits your financial needs, you can seek help from RCBC’s financial advisors or fund managers.

Getting Started with RCBC UITF in the Philippines

Placing your money into UITFs can be a daunting experience, especially if you’re new to the world of investing. We understand how there are a lot of terms and information to take in, which can be overwhelming as you plot your financial strategies.

And, of course, when taking risks in investing your hard-earned money, you’ll want to choose a trust fund in the Philippines that can meet your needs. With that said, here’s why you should choose RCBC’s UITF:

• Professional Expertise: With RCBC, you benefit from the expertise of seasoned fund managers who make informed investment decisions based on continuous market analysis and research. This professional management can help you navigate the complexities of the financial markets.

• High-Return Potential: RCBC boasts of its average yearly returns as it has historically performed better than other investment products. In fact, our RCBC Peso Fixed Income Fund won as the Best Managed Fund of the Year this 2023 as it delivered the highest risk-adjusted return, according to the CFA Society Philippines. Prior to that, our RCBC Equity Fund has been recognized by the same association as the Best Managed Fund of 2021, producing returns of up to 4.73%. These awards show that partnering with us and our UITF packages has a greater potential for your financial advancement.

• Accessibility: RCBC’s investment streams are accessible through digital platforms and business centers. So, if you want to invest in UITFs now, it’s as simple as a click of a button or a short drive to the nearest branch.

• Affordability: Compared to the UITFs from other institutions, the minimum initial investment required by RCBC is relatively smaller. Peso investments are just at ₱5,000, while US dollar investments start at $200. 

Leverage RCBC’s advantages and start your investment journey with our UITFs. Our diverse portfolio of UITFs is beginner-friendly and can adapt to your changing needs as you get accustomed to investing. 

Find out how to invest in our UITFs online, and pave the way to your financial growth today!