UITF Triple Threat: BDO vs. BPI vs. Metrobank!

Last week, we introduced you to unit investment trust funds or UITFs. If you recall, a UITF is a type of investment where funds from several investors are pooled and invested in a portfolio of securities that is actively managed by a professional fund manager. In this post, we take a look at the different factors that you should consider in choosing a UITF and a side-by-side comparison of the UITFs offered by the biggest banks in the country.

1. Your risk profile and investment horizon

How do you view risk? Are you more of a risk taker or a risk avoider? How long can you afford to invest your money? Typically, your answers to these questions would follow a certain relationship: in general, risk-averse investors prefer to invest only in one year or less while risk-seeking individuals would be more inclined to play the game in the long run.
Your risk profile and investment horizon would determine the kind of UITF you should choose: for example, if you think you are a risk averse investor with a short investment horizon, then the highly liquid money market fund would be better suited for you. The rule of thumb is to match your risk appetite to the risk of the securities the fund is invested in. Below we see a side-by-side of three kinds of UITFs in terms of composition, risk, and liquidity considerations.

	Money Market Fund	Balanced Fund	Equity Fund
Composition	Special Deposit Accounts (SDAs) and Treasury bills	50% Fixed Income Securities, 50% PSEi stocks	80 to 90% PSEi stocks
Fund Risk	Low	Medium	High
Minimum Holding Period	Up to 7 days	30 to 90 days	30 to 90 days

2. Minimum investment

Perhaps the most important measure of how affordable an investment is is the minimum required investment: many of us would probably love to own a Jollibee franchise, if only the required 25-million-plus-peso investment were within our reach. The same is true for UITFs, as banks require varying minimum investments for their UITFs. On a similar note, banks also require a minimum amount for additional investments, sometimes making it more challenging for simple investors to quickly increase their UITF participation.

3. Fees

Banks perform the service of safekeeping, managing, and balancing our funds for a fee (if you ever hear a bank give something, anything, away for free, let me know), or actually, several fees: the trust or management fee, custodian fee, audit fee, and early redemption fee, just to name a few. If you are a “price conscious” buyer of anything, then UITF fees should matter significantly to you. But to simplify things, let’s just focus on the two most significant fees: the annual management fee and the early redemption fee, which you’ll have to pony up in case you decide to sell your units before the minimum holding period expires.

Below we see how Banco de Oro (BDO), Bank of the Philippine Islands (BPI), and Metrobank compare in terms of minimum investment, fees, and minimum holding period for the three UITF types mentioned above.

Money Market Fund

	BDO	BPI	Metrobank
Minimum Investment	100,000 pesos	50,000 pesos	50,000 pesos
Minimum Additional	100,000 pesos	10,000 pesos	25,000 pesos
Management/Trust Fee	0.50% per year	0.75% per year	1.00% per year
Early Redemption Fee	None	0.25% of original investment	50% of income
Minimum Holding Period	None	7 days	7 days

Balanced Fund

	BDO	BPI	Metrobank
Minimum Investment	10,000 pesos	50,000 pesos	25,000 pesos
Minimum Additional	10,000 pesos	10,000 pesos	25,000 pesos
Management/Trust Fee	1.00% per year	1.50% per year	2.00% per year
Early Redemption Fee	0.50% of original investment	0.50% of original investment	50% of income
Minimum Holding Period	30 days	90 days	90 days

Equity Fund

	BDO	BPI	Metrobank
Minimum Investment	10,000 pesos	50,000 pesos	25,000 pesos
Minimum Additional	10,000 pesos	10,000 pesos	25,000 pesos
Management/Trust Fee	1.00% per year	1.50% per year	2.00% per year
Early Redemption Fee	1.00% of original investment	0.50% of original investment	50% of income
Minimum Holding Period	30 days	90 days	90 days

4. Bank reputation

In the end, your choice of bank may just boil down to how much trust you place on each. Maybe you already have decades of pleasant experience with a particular bank, and you would want to reward it by giving it more of your business. Maybe you’re just trying to impress a cute bank teller of that bank; in that case, maybe there’s no minimum investment or management fee high enough to keep you from choosing the bank, or making a fool of yourself (no joke, I feel you bro).

5. That’s it

We’re done here? How about the each fund’s past performance? Shouldn’t that be a factor in choosing a UITF?

Now that you mention it—yes, it should. Well, kind of. While I might agree that better past performance may well indicate a better-skilled fund manager, in general all funds behave more or less similarly with respect to a particular benchmark like the PSEi; for the balanced and equity funds, for example, half the time you’ll see the fund outperform the benchmark, and half the time you’ll see it bite the dust, regardless of the bank, and the fund manager, for that matter.
Also, as a rule don’t rely on past performance so much; the future is waaaay less predictable than what many so-called professionals profess. If predicting the future were just as easy as getting the average fund yield in the past five years or so, then we would all be richer by now.

So, are you able to choose a UITF yet? I have. Because I think a can afford to invest a small sum in the long run (and also because I’m blinded by pure, unadulterated greed for high returns), I’m planning to invest in one of those equity funds, despite the looming cloud of uncertainty brought about by the coming elections. As for the bank whose fund I’ll patronize, the answer to me is clear as day; it seems I won’t be seeing that cute bank teller for a while. ;)


Click here for a one-on-one comparison of BDO and BPI UITFs.