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BSP Allows Unit Investment Trust Funds with Unit-paying Feature


In line with the thrust of the Bangko Sentral ng Pilipinas to institute reforms that will take advantage of investment opportunities while ensuring market order, both of which are expected to accrue to the investing public, the Monetary Board in its meeting held on 8 April 2015, approved the amendment of the Unit Investment Trust Fund (UITF) regulations to allow for a unit-paying feature that will provide non-guaranteed stream of income to participants. 

The unit paying UITFs will invest in various income-generating securities and upon determination of the trust entity shall give out the income in its equivalent units, for automatic redemption.  The income distribution shall come from cash dividends or coupon/interest earned and received from these investment outlets.  However, income distributions are not guaranteed and will be determined by the trust entity in accordance with the plan rules.  Further, such income distribution will decrease the net asset value of the fund, and consequently, a decline in the net asset value per unit (NAVPu) similar to the effect of dividend declaration on stock prices. 

Previous to this, UITF regulations do not allow for the distribution of income to the participants, as income earned is automatically reverted back to the fund and the same may only be realized by the investors upon redemption of their participations to the UITF.

This initiative offers several advantages that will ultimately benefit the investing public and the UITF market.  In particular, the unit paying UITF will enable the investor to enjoy the fruits of his investment without actually the need to redeem his actual principal investment.  Also, the same is expected to expand the investment choices of the investor, thereby allowing him more opportunities for diversification.

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