Investigative study into the Philippine trust industry's peso fixed income bond unit investment trust fund (UITF) products' sudden drop in net asset value per unit (NAVpu) for the period of April to May 2006

Date of Publication

2007

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Defense Panel Member

Rolando D. Esguerra

Abstract/Summary

Unit Investment Trust Funds (UITFs) were launched last September 3, 2004 through Circular 447 of the Bangko Sentral ng Pilipinas. The investing public had shown initial acceptance for the UITF, evidenced by the unexpected rapid growth reaching up to 261 Billion Pesos during March 2006. The growth was attributed to the high yielding returns associated with UITF investments. However, last April to May of 2006, there was a sudden turnaround in the UITF market, when the Net Asset Value per unit of UITFs declined.

The proponents of this study found several factors that affected the drop in UITF’s NAVpus: first, the continuous increase of U.S. Federal interest rates, followed by the succeeding negative news surrounding UITF second, the risk intolerance of UITF investors that led to the massive panic withdrawals third, the faulty marketing of UITF to clients lastly, the limitations on allowable investments and the inability of the Philippine Capital Market to absorb huge sell-offs of securities where the UITF funds were invested.

The UITF meltdown experience led the investing public to be aware of the risks involved in UITF and for administrators to create improvements to further strengthen the product.

Resulting from the study, the proponents listed a number of recommendations to improve and strengthen the product, namely: (1) to implement proper and stricter rules and policies especially to apply to the marketing personnel (2) to adopt a uniform cut-off time setting for NAVpus valuation (3) to implement a minimum holding period to weed out not investors (4) to allow banks to use accrued valuation for securities with remaining life of less than one year (5) to increase cooperative effort between BSP and the industry to hasten the growth of the capital market (6) to create a centralized venue for the trading of government securities."

Abstract Format

html

Language

English

Format

Electronic

Accession Number

CDTU020514

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

319 leaves : ill. (some color) ; 28 cm. + 1 computer optical disc ; 4 3/4 in.

Keywords

Trust and trustees--Philippines; Trust companies-- Philippines

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