Are you considering investing in UITFs?

UITFs or Unit Investment Trust Funds are pooled funds offered by the trust department of the major banks of the country.

But what is a UITF? As per the Trust Officers Association of the Philippines (TOAP), they defined it as “an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity and made available by participation. Each UITF product is governed by a Declaration of Trust (or Plan Rules) which contains the investment objectives of the UITF as well as the mechanics for investing, operating and administering the fund. Most UITFs are considered medium to long term investments.  Clients considering to invest in UITFs must have the financial resources to stay invested in them for a reasonable period of time in order to maximize earnings potentials.  If the funds to be invested will be needed by the client in the immediate future, the UITFs may not be a suitable investment vehicle for such client.”

UITFs are very good investment instruments for investors with a longer time horizon and are comfortable with the volatility typical of pooled funds. Pooled funds can be high risk when invested in equities, low risk when invested in fixed income (bonds) or moderate when invested in a balanced fund.

Before jumping into UITFs, it is best that you understand the nature of this instrument. Further, it is advisable that you check on the fees associated with pooled funds — they are not all the same. Some funds require entry and exit loads and some funds have higher management fees. Fees will ultimately affect your yields.

2012 was a good year for investments, particularly for equities so it is expected that equity UITFs will do really well. I need to caution readers, however, that returns are not the sole factor if selecting a fund. Aside from fees, it will be good to check on how volatile the funds are, experience of the fund manager and size of fund. Bigger funds are usually less volatile but may not have the best performance. Further, equity funds that are more diversified and having more variety in the fund is generally less risky. Let’s compare two funds even if they are both equity funds — a fund that is invested in only 10 companies might perform better than a fund that is invested with 20 to 30 companies since certain calls are easier to make. However, the fund with fewer companies are riskier since one bad call of the fund manager can have a large impact on the fund.

My advise — talk to your bank and do your homework. Regardless, I am a fan of UITFs because in the long run, these investments will help me achieve my financial goals. Personally, I go with bigger sized funds that offers the lowest fees offered by the larger and more stable banks.

To know more about UITFs, please read my earlier blog HERE. You can also check out performance of Philippine funds at Bloomberg’s SITE.

Up next in the outlook series is the view of a young financial planner and stock market investor. Despite his age, he is truly full of financial wisdom and his views are one of those that I follow and his advise I often seek. A former I.T. pracitioner turned finance guru. Marvin Germo has been very active in investor education and has become a sought after expert in his field.

The 2013 Outlook of Marvin Germo

I call 2013 a step into the greater! 2012 was great, but 2013 will be the staging point for even grander things to come. 2012 showed the world how great our market is, but 2013 will show how we can sustain it and how we can take it even further.

Based on a recent survey, 93% of every Filipino believes that 2013 will be a very good year for them.  Let me breakdown the reasons why.

 Government

– Never in recent history has there such been such confidence in our present administration.  Local and international businessmen are upbeat to further invest and place billions upon billions of their money in our country.

– The peace treaty in Mindanao will open up opportunities for more business to flourish in a region plague by years and years of war.  Our countrymen down south can now finally live their lives normally and think about progress instead of war.

– The sin tax law will further increase government revenues to create multiples streams of opportunities to further grow our economy.

– The government under spent the past 2 years, and will further compensate to pump in more money this year to make up for the 2 years where it spent less.  This will fuel more growth for our economy and build more infrastructures to help our country move forward.

– 2013 is election year!  This will drive even more consumption, increase sales of companies in media, printing, consumption, logistics, and so much more!   History is on our side telling us that our economy is very vibrant during election years.

Money Matters

– The Philippine Peso is the strongest currency in Asia and as of this writing has just breached its 5^th year high against the US Dollar.  As months go by, expect the Peso to gain even more ground as America’s economy still continuous to be shaky.

– At this point we have one of the biggest reserves in our entire history!  Our government has so much cash at its disposal right now!  We even lent money to the IMF last year as a show of force on how strong we already are.

– Interest rates are low, meaning more businessmen can loan more money to fund their business and make it even bigger.

-Inflation is relatively low, allowing people to spend more at its current levels and further fuel the economy.

 Economy

– The 2^nd best economy in Asia, trailing only China from the last GDP results

– We have one of the hottest stock markets worldwide

– The Philippine BPO sector continues to dominate and remains to be a massive source of income for our country.

– OFW remittances continue to increase thus fueling the consumption and investment opportunities for our country.

– Property boom, there is still a large number of Filipinos who do not have homes and the increasing inflow brought about by the BPO and OFW markets have allowed families to purchase properties of their own.

– Consumption, this will be one of the biggest stories this year as more money moving around allows more Filipinos to spend and consume more.

– Growth prospects of local companies expanding not just locally but also abroad.  SM and Jollibee continues to expand in China.  Universal Robina Corporation is expanding its exports to other parts of Asia among others.

Technicals

I am very much a technical analysis guy as much as I am inclined to fundamental analysis.  Just by looking at charts, it is pretty evident that our market is in a long term uptrend and until I see any evidence that it will reverse, I’ll still be invested in equities or equity funds.  If things play out right, consensus reports see our market going up to 6,500 – 6,800 this 2013.  Who knows, as upbeat as we are right now we might even go to 7,000 at some point in 2013?

Now is the time for us to take a look at our country, move forward and take advantage of the vast opportunities that are coming our way.  I really believe this with all my heart that by God’s favor and Grace we are stepping into the start of one of the greatest days that are nation has yet to see.

Marvin Germo, RFP, ECE, is the General Manager of Ephesians Management Corporation and is a Financial Planner and Advisor who is one of the up and coming personal finance speakers in this generation. His Passion and zeal to educate the Filipino people has translated into transformed lives, financially free families and has moved ordinary consumers into investors.

He is an Entrepreneur and an International Financial Resource Speaker who out of his eager desire to make an impact in this nation has spoken in different spheres of society – corporations, government agencies, churches, schools, clubs, organizations, and numerous public events. His ability to breakdown complicated investment concepts and translate it into something that is simple, basic and understandable has made him one of the most sought after money speakers in the land. He has been a stock market resource person for Studio 23, ANC, TV5, Teleradyo, DZMM, GMA News TV, and 92.3 FM. HE is also a stock market write/contributor for Money Sense Magazine and BussinessMirror

He completed the Registered Financial Planners Institute (RFPI), he is a Stock Market Trader & Investor and has around six years experience in the Philippine financial industry. He specializes in technical analysis and position trading as one of his core modules in his stock market lectures. He also owns (www.marvingermo.com), a financial planning help site. He graduated from Mapua Institute of Technology with a Bachelor of Science in Electronics & Communications. He has completed the Philippine Stock Exchange Certified Specialist Course in the Ateneo Center for Continuing Education.

It is a pleasure to present the outlook of an esteemed colleague and a veteran in the investments industry, Mr. Ricky So. Ricky has extensive experience in the arena of investments which dates back to over two decades. Today, Ricky is an advocate of investment education as he helps make many Filipinos a real investor.

The 2013 Outlook of Ricky So

The year of the snake bodes well for the financial markets as the book says people born in the year of the snake are fortunate with finances. This is the astrology part. I do not mind the source, for as long as it is positive, I tend to believe it.

For the Philippines economy and markets, 2013 will be a great year of milestones as we are likely to achieve the most coveted and once elusive investment grade status from leading global credit ratings companies.  (Never mind, their questionable past during the global crisis of 2008, this time they are doing well with us.)  This milestone will be a catalyst to more positive developments for the Philippines. Foreign direct investments will most likely pour in bigger investments than before perhaps rising more than 100% over the coming years.  Portfolio investment will likely follow suit with a bold outlook of about $10 bln for this year along.  This will pave the way for the equity markets to record new highs towards Q2 to Q3 rising another double digit gains as inflation continues to be tame with interest rates possibly lowers a few basis points more.  I predict the PSEi to reach record levels beyond 6500 but not 7000, somewhere in between.

The continued challenges in US and in Eurozone economies bode well for our BPO sector generating more dollars (my estimate is it growing 15%) and employment as well. I can see the unemployment rate moving another 1% lower from the present rate of about 7%.   Alongside, the perennial winner OFW remittances will provide additional inflow of 1 to 2 billion dollars from 2012’s estimate of $21 bln. The result of which is a stronger peso moving towards P38-39 per greenback towards the end of 2013.

Over-all the PHL economy will be well this year and perhaps over the coming years. It is time to invest in the Philippines and attract more foreign investments and rekindle the local investors both onshore and offshore.

Ricky So’s professional credentials:

• SEC Licensed Commodity Futures & FOREX Solicitor, 1987 to 1996

• SEC Certified Investment Solicitor (CIS), 1997 to present

• Investments Lecturer, Insurance Institute for the Asia and the Pacific (IIAP), 2004-2005

• Lecturer, Investment Company Representative Certification Seminar, 2000 to present

• Founder and Facilitator, PAMI Investment Clubs, 2003 to present

• Alternate Member, Fund Managers Association of the Philippines, 2007 to 2011

• Director, Association of Registered Financial Planners in the Phils., 2008 to 2009

• Registered Financial Planner (RFP®), 2008 to present

• Stock Market & Technical Analysis Lecturer, Global Investor’s Center Phils. Inc., 2009 to present

• Portfolio Management Lecturer, AIM-EXCELL Strategic Inv. Mgt. Program 2009 – present

• Training Faculty, RFP Philippines – July 2011 to present

• SEC Certified Securities Representative Eligible – March 2011

• Lecturer, Managing Equity Portfolio, Chartered Wealth Manager (CWM®), July 2012 to present