THE CENTRAL BANK is expanding opportunities under unit investment trust funds (UITFs) by allowing placements in government-issued debt papers.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said the Monetary Board has approved more options for UITFs to further entice investors with low risk tolerance.
“In order to maximize participation of the trust industry in the said issuance of the BTr (Bureau of the Treasury), the Bangko Sentral has expanded the allowable investments of conservative money market UITFs to include securities issued by the national government,” Ms. Fonacier told reporters.
UITFs consist of funds pooled from retail investors that are managed by a trust company or a bank’s trust department, which decide where to invest said funds.
Prior to this new rule, UITFs could be invested in bank deposits, which are relatively low-yielding compared to other instruments. Once a circular is issued, Ms. Fonacier said banks can deploy UITFs in floating-rate notes issued by the government. This comes ahead of the BTr’s planned sale of P15 billion worth of such notes.
The state is looking to issue floating-rate notes following recent rejections in regular Treasury bills and bond auctions, as rates offered for these debt papers were deemed too high compared to what the government was willing to pay.
Ms. Fonacier said market participants have expressed significant interest in the new investment instrument.
“The Bangko Sentral believes that with these developments, the industry will greatly benefit as they will be able to offer more options to their client segments and will be able to give their clients opportunities to obtain higher yield than traditional deposits and be able to grow their money,” the central bank official added.
More sophisticated UITFs allow asset managers to make bets in government-issued debt papers, tradable securities issued by foreign countries, exchange-listed securities and debt papers, loans traded in an organized market, loans from repurchase agreements, and in shares in collective investment schemes to grow an investor’s principal. — Melissa Luz T. Lopez