Differences Between Mutual Funds and UITFs (Unit Investment Trust Funds)

Know the Difference Between Mutual Funds And UITFs

Both Mutual Funds and Unit Investment Trust Funds (UITFs) are becoming popular these days. because they’re both investment vehicles that does not require much of the investor’s time and effort. Your just simply ask to do three things: to invest, to monitor your investment on times you like, then to redeem.

Before I talk to you about the differences between Mutual Funds and UITFs, I would like to tell you how the two are almost identical to one another. First, both of them are pooled funds and are used to invest on other investments like bonds, stocks etc., depending on the investor’s choice. They are different types of Mutual Funds; such as Money Market Funds, Bond Funds, Balanced Funds and Equity Funds, well for some reasons, those are also the different types of Unit Investment Trust Funds.

Now for the differences, Mutual Funds are offered to you by an investment company, meanwhile, banks are the ones offering Unit Investment Trust Funds. Second, Mutual Funds are regulated by the Securities Exchange Commission (SEC) and the UITFs are regulated by Bangko Sentral ng PIlipinas (BSP).

Those two are managed by someone else not by its investors, Mutual Funds are managed by a professional manager chosen by the investment companies, while UITFs are managed by a Trust Group of the bank.

Are those the only differences between the two? No, they’re not. When you invest in Mutual Funds, you buy shares of the fund you have chosen. Basically, you become a shareholder and you get rights and privileges like the right to vote and the right to receive dividends. Meanwhile in UITFs, you are buying investment units that doesn’t comes with a shareholder’s rights because you’re not buying shares of a company.

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The price you pay on both funds are based on the Net Asset Value, it’s the total value of the funds assets minus its liabilities, divided by the number of shares held by its investors. As said above, Mutual Funds is to shares as UITFs is to investment units, so the only difference is that in Mutual Funds you pay according to the Net Asset Value per share (NAVPS), while in UITFs you pay based on the Net Asset Value per unit (NAVPU).

When you invest in  these funds, they are fees or charge that you will be asked to pay. When it comes to Mutual Funds, the fee you may be charge on is either an entry fee (sales charge) or an exit fee (redemption fee). Meanwhile, the fee you will be ask to pay on UITFs is the management or trust fee.

Unit Investments Trust Funds are offered to you by banks as stated above, but these are not guaranteed or insured by the Philippine Deposit Insurance Corporation (PDIC). The reason for this is that UITFs are not savings account, they are investment products. As for Mutual Funds, they are also not insured by the investment company, so before you put your money in these funds make sure your ready and you know how to manage the risks involved when it comes to investing.

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Differences between Mutual Funds and UITFs

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Mark Holland

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