Mutual Funds and Unit Investment Trust Funds (UITFs) work pretty much the same way. Investors pool their money, a fund manager handles the money, makes the investment, and the returns are given back to the investor after fees are deducted as payment to the fund manager. So how are they different?
Here’s a quick comparison of the two.
Where to invest…
MF: A mutual fund company. They are usually offered by insurance and investment companies. Here’s a list of Philippine mutual fund companies.
UITF: Commercial banks, particularly their trust, investment or treasury department. They are sold by authorized bank employees.
Who regulates these companies…
MF: Securities and Exchange Commission (SEC)
UITF: Bangko Sentral ng Pilipinas (BSP)
What you are buying in a fund…
MF: Common shares in the investment company
UITF: Units of participation in the fund
Who is the fund manager…
MF: Appointed by the investment company
UITF: Trust Group of the bank
The price of the fund is expressed in terms of…
MF: Net Asset Value Per Share (NAVPS)
UITF: Net Asset Value Per Unit (NAVPU)
Investment fees and their usual range…
MF: sales charges (1%–5%), redemption fees (0.5%–3%), administration fees (1%– 2.5%)
UITF: sales charge (0% – 2%), redemption fee (1% – 2%), trust fees (1% – 1.5%)
Here are some general advantages and disadvantages between Mutual Funds and Unit Investment Trust Funds:
- More regulated as companies are required to submit regular reports and are subject to full disclosure
- More transparent and has higher accountability
- May give the investors dividends and other shareholder’s rights
- It is tax-exempt in terms of capital gains
- Has sales charges and has higher management fees
- May offer fewer investment choices for investors due to high capital requirements
Unit Investment Trust Funds
- Wider range of investment options available for investors
- None or very low sales charge
- Lower management fees
- Less regulation
- Less transparent with its investments
- No dividends and no shareholder’s rights
- Comes with a 20% withholding tax on capital gains
So which one is better? Personally, I think there are no major differences between the two. Neither one gives a higher return than the other. Wherever you decide to invest it, it will be exposed to risks and returns are uncertain. But, as compared to placing your extra money in deposits, both are better investment options.
Well, I hope this article was able to help you know the difference between mutual funds and unit investment trust funds.
Note: Before investing, remember that none of the returns are guaranteed, so have an emergency fund first so that you’re covered if the worst does happen to your investments. When choosing your investment portfolio, go with the one that most matches your risk appetite, time horizon and your financial goals.