Personal investing in the Philippines: Opening a unit investment trust fund (UITF) account

In my previous post, I wrote about my first foray into mutual fund investing. While I am optimistic about my fund choices, one aspect I don’t like about mutual funds in the Philippines is their high fees.

I am investing for the long term and don’t intend to redeem my shares anytime soon. Unless every year from here on out will be like 2008, the gains will likely cover the deductions in the long run. Still, it smarts to think of the greater returns to be had if only management fees are lower and sales loads don’t exist.

Because of these high mutual fund fees, I was enticed to invest in unit investment trust funds (UITFs). UITFs are products of Philippine banks that operate similarly to mutual funds.

Many local banks offer UITFs, but for convenience I chose those offered by Bank of the Philippine Islands (BPI). BPI UITFs are managed by BPI Asset Management, a subsidiary of BPI. Click here for a complete list of their UITFs.

If you already have a) a BPI deposit account that is b) enrolled in their online banking facility, BPI Express Online, it’s quite easy to open an investment account:

1. Log on to BPI Express Online.
2. Go to Investments > Apply Now > Unit Investment Trust Funds.
3. Fill out the online form. BPI will restrict your investments only to UITFs that suit your risk profile, as determined by your answers to their multiple-choice questionnaire. If you wish to invest in their equity or stock funds, choose “D” as much as possible in order to be classified as an “aggressive” investor.
4. Print and sign the completed form.
5. Submit the form to the nearest BPI branch.
6. Wait for their confirmation email. I got mine within two weeks.

And that’s it. Your new investment account now appears under My Portfolio, and you can now buy units of participation by transferring funds from your settlement account. You can also subscribe to more than one UITF without having to open additional accounts.

I can only speak for BPI UITFs, but their advantages over mutual funds include:

• No holding period. You can redeem your units anytime without being charged an exit fee.
• No entry fees. This only applies to BPI Investment Funds; Odyssey Funds do charge transaction fees for every subscription, but they’re considerably less than what mutual funds charge.
• Lower management fees. A caveat: Do you due diligence and read up first on the different UITFs before you subscribe to one, because a few of them do have additional fees. BPI Premium Bond Fund, for instance, sounds enticing, but careful inspection of the fine print reveals that it charges an annual “Special Expense” of PHP 2, 000 for “publication” purposes (whaaat?).
  Edit: Turns out this special expense is deducted from the fund’s whole assets. PHP 2, 000 is not deducted from each investor’s holdings every year (whew).

All in all, my UITF account opening experience was a pretty painless one. I do have to commend BPI for seamlessly integrating their investment arm into their online banking facility.