MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) announced Friday, April 15 the amendment of the Unit Investment Trust Fund (UITF) regulation to include a unit-paying feature to give non-guaranteed stream of income to participants.

Similar to mutual funds, UITF is a type of pooled investment. Stock/Equity UITFs are also the winners in the UITF category, outstripping the balanced and bond/fixed income funds in terms of returns. (READ: The winning investments of 2014)

The central bank said that based on the Monetary Board meeting April 8, the amendment was decided for the investing public to benefit from investment opportunities while ensuring marker order.

Prior to the amendment, the 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 participation in the UITF.

How unit-paying UITFs work

Per BSP amendment, the unit-paying UITFs will invest in various income-generating securities and upon determination of the trust entity, give out the income in its equivalent units, for automatic redemption.

The income distribution shall come from cash dividends or coupon or interest earned and received from these investment outlets.

The unit-paying UITF will also enable the investor to enjoy the fruits of his investment without actually redeeming his actual principal investment.

Also, the same is expected to expand the investment choices of the investor, thereby allowing him more opportunities for diversification.

However, income distributions are not guaranteed and will be determined by the trust entity in accordance with the plan rules, the BSP said.

“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,” the BSP explained.