4 Things That You Need To Know about the "Special Expense" Item in BPI UITFs

In one of his recent comments, reader Ken has mentioned a "special" charge of 2,000 pesos per year for BPI UITFs. It was unclear what this expense was for, and how it was applied. To get some answers, I looked at some publicly-available documents and sought the help of BPI Asset Management (BPI AM) representatives. Here are what I found out.

1. The item "special expense" started appearing in BPI's monthly fund reports in December 2010 (after I published my comparisons here and here).

Screencap from BPI Equity UITF November 2010 Report

Screencap from BPI Equity UITF December 2010 Report

I checked the BPI Short Term, Premium Bond, and Balanced Funds and saw the same change in the December 2010 reports.

2. There is no such item in reports of other UITFs. I checked with RCBC, and they have confirmed this. And the latest report for BDO's equity UITF does not show this item.

Screencap from BDO Equity UITF January 2013 Report

Now before anyone panics or makes hasty conclusions, there are many possible reasons for this difference. It may be that by disclosing this expense, BPI AM just wants to be more transparent to its clients.

3. Just as the footnote says, the expense is for "publication" purposes. According to a BPI AM representative, the expense is for the publication of a BPI UITF's NAVPUs in relevant publications (such as Business Mirror). Based on this, it goes without saying that other UITFs that publish NAVPUs in periodicals should incur a comparable cost.

4. 2000 pesos is charged against a fund's net asset value or NAV (not to be confused with net asset value per unit) every year, not per account and not per investor. Based on BPI Equity UITF's latest NAV of around 3.75 billion pesos, the annual fixed expense of 2,000 pesos just amounts to 0.0000533% of the fund's value, so should not be a cause for concern for investors. Also, the expense (like all other non-sales expenses) is already reflected by the NAVPU at any given moment.

Personally, I think this "special expense" for publication is common with many other UITFs, and is really nothing new or something that we should be concerned about. How BPI AM decided to start disclosing it, how it is presented in BPI AM's reports, and how other UITFs don't disclose it, however, may cause some confusion and maybe even concern for potential investors of BPI UITFs. But regardless of whether other UITFs charge a comparable expense or not, at 2,000 pesos per year it is too small to make a difference in any fund comparison exercise.