Big banks pick up pieces of UITF mess
By Jun Vallecera
Reporter

SOME of the big guns in banking have assembled their top money managers to distill the lessons learned from the mass selldown of unit investment trust fund, or UITF placements.
       Banking sources said Tuesday the Metropolitan Bank and Trust Co., the country’s largest by assets, loans and deposits, moved quickly in order to stay ahead of a crisis that has already penalized investors of a supposedly safe investment outlet that has grown into a P230-billion business.
       Sources said Metrobank fears that its niche market, the Binondo-based Chinese-Filipino community, was hit so hard by the mass selldown it might be more gun-shy now that the crisis is under control.
       “We are gathering the data. We need them in order to identify sources of stress going forward,” a senior money manager said in a telephone interview.
       Metrobank’s response came in the wake of complaints from the investing public that the Bangko Sentral ng Pilipinas’ effort to contain the UITF mess had been “token and rather belated.”
       Banco de Oro Universal Bank, which has its own UITF, also has similar plans although this could not be independently confirmed.
       But its president, Nestor Tan, candidly admitted that while their UITF unit was hit by the mass selldown, the same had been immediately contained and their investors are assured their money is relatively safe.
       “I believe the worst [is] over,” Tan said at his bank’s annual meeting of shareholders a week ago.
       According also to banking sources, putative plans to license UITF investment counselors or marketing persons, as they are called, could not now help those whose money has been lost in the panic.
       “The BSP should have red-flagged the situation long ago and should have intervened earlier,” sources argue.
       According to Raffy Ayuste, past president of the Trust Officers Association of the Philippines, the UITF market has definitely recovered, particularly the five-year segment where rates have gone up to around 8.5 percent from only around 7 percent recently.
       “This shows the outlook for the bonds has moved up,” Ayuste said, bonds being the underlying instrument that drives the UITF business.
       He said the standards for investing in UITFs are spelled out clearly under BSP circular 447 and that as basic guidelines, these should be enough.
       The selldown came because people panicked “and made it worse by spreading their fears through technology and by word of mouth,” he noted “I think TOAP is moving toward strengthening the standards further going forward, to put in more meat so it will be a lot safer,” Ayuste said.
       UITFs, in which retail investors find financial clout in the pooling of funds, sold like hotcakes when yields were as high as 21 percent, but these have been sold en masse as interest rates moved down and returns were a fraction of those in the UITF heydays.
       Bankers admit some of their members were not fully transparent in educating people about the perils of the business and that UITF investments are marked to market each day, such that the value of one’s participation changes by the same token.
       Marking to market is a transparency requirement but has proven useless for investors with very short investment horizons in this case.
       Bankers explained that while UITF returns are more than traditional deposits could give, one could lose the principal investment just as much, depending on the time of entry and exit in the fund.
       Bankers said an investor who chooses to lock in for the duration of the fund, say five or seven years, stands to keep his money plus the interest thereon.
       “UITFs are not for everyone, especially the short-duration investor,” bankers said.