Fund-of-Funds Primer
1. What is a Fund-of-Funds?
A Fund-of-Funds is a Unit Investment Trust Fund (UITF) that invests in other collective investment schemes (CIS). A CIS is an investment vehicle where funds are solicited from investors for collective investment and which are managed for the account of such investors. Examples of CIS are UITFs, Mutual Funds, and Exchange Traded Funds (ETFs).
A Fund-of-Funds is mandated to invest AT LEAST 90% of its assets in more than one CIS. Such underlying CIS are selected consistent with the provisions on the investment objective and investment policy of the Fund’s Plan Rules, following the Trustee's established investment process.
A local or foreign CIS in which the Fund-of-Funds invests all or a portion of its assets is also called a Target Fund.
Here is a graphic representation of a Unit Investment Trust Fund-of-Funds.
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.
2. What makes a Fund-of-Funds similar to a regular UITF?
A Fund-of-Funds, like a regular UITF, is established and operated subject to the provision of its Plan Rules. It must also comply with all the regulations issued by the Bangko Sentral ng Pilipinas (BSP), particularly BSP Circular No. 767.
All investors who wish to invest in a Fund-of-Funds must also take a client suitability assessment to establish the suitability of the investor to the Fund. The determination of the market value of the investments of the Fund shall be in accordance with existing BSP rules and regulations on marking to market valuation of investment instruments.
3. What makes a Fund-of-Funds different from a regular UITF?
Fund-of-Funds are allowed to invest at least 90% of its assets in more than one CIS. On the other hand, regular UITFs are not. Regular UITFs can only invest directly in securities such as stocks, bonds or money-market instruments.
The performance of Fund-of-Funds is not only driven by market environment and the management of the overall portfolio of the Fund by BPI Asset Management. The manner by which each of the underlying target funds are managed by their respective fund managers will also affect the performance of the Fund-of-Funds.
4. What are the exposure limits to a Fund-of-Funds?
To protect investors from taking on too much risk, all Fund-of-Funds must comply with the exposure limits set by the BSP. There are 2 limits to remember:
a) The first exposure limit is between the Fund-of-Funds and the CIS. Investments in any one CIS must not exceed 10% of the total market value of the CIS. b) The second exposure limit is similar to the regular UITF exposure limit wherein combined exposure to any entity and its related parties must not exceed 15% of the market value of the CIS.
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.
5. What are the other unique requirements for a Fund-of-Funds?
The underlying CIS of a Fund-of-Funds must also comply with the following requirements:
a) The investment objectives of the CIS are aligned with that of the Fund-of-Funds. b) The underlying investments of the CIS are limited to the allowable investment outlets under the UITF regulations. c) The CIS has no investment in other CIS. d) The CIS are supervised by a Regulatory Authority: i. Philippine-domiciled CIS – regulated by the BSP or the Securities and Exchange Commission (SEC). ii. Foreign CIS – a Regulatory Authority that is a member of the International Organization of Securities Commission (IOSCO). e) The CIS are registered, authorized and approved in its home jurisdiction by a Regulatory Authority.
6. Can the Trustee change the target funds of the Fund-of-Funds?
BPI, as the Fund’s Trustee, has the discretion to choose and switch target funds due to the following reasons:
a) Performance vis-à-vis expectations b) Change of focus c) Resignation of fund managers d) Closure of target funds e) Prolonged suspension of trading
7. How will investors be notified in case of switching of target funds?
If the new target fund has a similar investment objective to the Fund-of-Funds, then there is no need to change the Plan Rules of the Fund-of-Funds.
The switch in target funds shall be communicated to existing investors via any of the following: a) Disclosure in the fund fact sheet or fund performance report. b) Disclosure in the Quarterly Investment Disclosure Statement. c) An announcement in the Trustee’s website.
However, when the switching of target funds results to a change in the investment objective of the Fund-of- Funds, the Trustee will notify existing investors on the amendments done in the Plan Rules. If they are not in conformity with the amendments, investors should be allowed to withdraw their participations within a reasonable time but in no case less than thirty (30) calendar days. This is consistent with BSP Circular 447.
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.
8. What are the benefits of investing in a BPI Fund-of-Funds? Here are the compelling reasons for considering BPI Fund-of-Funds.
a) Simplicity and convenience – FoFs is your access to expertly managed investment funds available outside of the Philippines which would otherwise not be easily available to retail individuals. You can invest in the BPI Fund-of-Funds through any BPI branch or through BPI Expressonline at your most convenient time. b) Affordability – For a minimum of USD 500, you can already diversify in various investment strategies offered by the BPI Fund-of-Funds. c) Greater diversification – As each of the target funds is a diversified portfolio in itself, FoFs is thus several times diversified which should help further reduce volatility in returns, aside from the fact that there could also be further diversity in the fund managers. d) Expertise of various reputable fund managers in a single fund – Each of the underlying target funds have been carefully selected through BPI’s due-diligence and robust accreditation process. Thus BPI Fund-of-Funds carry the best-of-breed investment funds.
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.
LEARN MORE ABOUT OUR NEW FUND-OF-FUNDS!
The BPI Global Bond Fund-of-Funds
The BPI Global Bond Fund-of-Funds is the country’s FIRST global fixed income fund-of-funds.
It allows investors to take advantage of opportunities in the global fixed-income markets by investing in collective investment schemes managed by reputable global fund managers which have passed the robust accreditation process of BPI Asset Management such as PIMCO, State Street Global Advisers, and Blackrock among others.
Why should I invest in BPI Global Bond Fund-of-Funds?
The Fund adopts a multi-sector fixed income strategy which means that it has greater flexibility in terms of coverage of its target funds as to duration, credit quality, region, and coupon type. This is particularly important during volatile markets to allow the Fund to adjust its tactical strategy and continue providing good stable returns to investors. Over the long-term this is also expected to generate the best total return since, historically, returns even within the fixed income space, vary among global high yield bonds, global investment grade bonds, and emerging market bonds. The Fund’s broad global strategy allows it to adapt to any interest rate environment, thus making it a good option despite current weakness in certain fixed income markets. Moreover, its access to floating rate bond funds can provide the needed yield enhancement in this rising interest rate environment.
Who can invest in the BPI Global Bond Fund-of-Funds? Clients with at least moderately aggressive risk profile. Clients who are looking for an alternative outlet for their US Dollars. Clients with a long-term investment horizon.
Summary of the Key Features: To achieve for its participants capital appreciation and income derived from a Investment Objective diversified portfolio of foreign currency-denominated fixed income collective investment schemes. Min. Initial Investment USD 500 Min. Add’l Investment USD 200 Trust Fee 0.75% p.a. Cut-off time 12 noon Subscription Settlement Day 1 End-of-Day Redemption Settlement Day 8 5:00PM Holding Period None Moderately Aggressive (This fund, prior to its amendment/conversion, was previously classified as moderately conservative. For existing participants with risk profiles lower than Investor Type moderately aggressive, we recommend taking a risk assessment either through the branch or through BPI Expressonline. Kindly seek the assistance of your UITF Marketing Personnel or Investment Counselor/Investment Specialist at your BPI Branch should you want to execute a waiver).
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.
The BPI Global Equity Fund-of-Funds
The BPI Global Equity Fund-of-Funds is the country’s first global equity Fund-of-Funds.
It allows investors to take advantage of opportunities in the global equity markets by investing in collective investment schemes managed by leading global fund managers such as Franklin Templeton, Blackrock and Fidelity Investments which have passed the robust accreditation process of BPI Asset Management.
Why should I invest in BPI Global Equity Fund-of-Funds?
The Fund adopts a flexible equity asset allocation strategy which allows it to focus on certain regions that are expected to outperform given the current market environment and based on investment and macroeconomic trends. As such, the Fund currently focuses on developed markets – US, Europe and Japan – consistent with the positive outlook on developing market (DM) equities on back of trends in fund flows favoring these markets, recovery in the US and UK regions and their accommodative monetary policy.
Through this single fund, you can leverage on the expertise of reputable fund managers who have extensive coverage and experience dealing with global equity markets.
The current focus of BPI Global Equity Fund-of-Funds in developed market equities can provide the necessary yield enhancement for an aggressive investor’s portfolio.
Who can invest in the BPI Global Equity Fund-of-Funds? Clients with an aggressive risk profile. Clients who are looking for an alternative outlet for their US Dollars. Clients with a long-term investment horizon.
Summary of the Key Features:
To achieve for its participants long-term capital growth by investing in a Investment Objective diversified portfolio of global equity collective investment schemes. Min. Initial Investment USD 500 Min. Add’l Investment USD 200 Trust Fee 1.50% p.a. Cut-off time 2:00 PM Subscription Settlement Day 2 End-of-Day Redemption Settlement Day 8 5:00PM Holding Period None Investor Type Aggressive
The BPI Global Bond Fund-of-Funds and the BPI Global Equity Fund-of-Funds will be fully aligned to their new strategy and structure starting March 3, 2014. Both are available in any BPI Branch or through BPI Expressonline.
For inquiries, you may call (632) 845-5340, (632) 845-5286 or (632) 845-5799, email [email protected] or visit www.bpiassetmanagement.com.
The Unit Investment Trust Fund (“Fund”), operating as a Fund-of-Funds is NOT a DEPOSIT product and is not an obligation of, or guaranteed, or insured by the Bank of the Philippine Islands or its affiliates or subsidiaries and is not insured by the Philippine Deposit Insurance Corporation (PDIC). Due to the nature of the investments, yield and potential yields cannot be guaranteed. Any income or loss arising from market fluctuations and price volatility of the securities held by the Fund, even if invested in government securities, is for the account of the trustor. As such, units of participation of the trustor in the Fund, when redeemed, may be worth more or be worth less than his/her initial participation/contribution. Historical performance, when presented, is purely for reference purposes and is not a guarantee of future results. The Trustee is not liable for losses, unless upon willful default, evident bad faith or gross negligence. Trustors are advised to read the Declaration of Trust for the Fund, which may be obtained from the office of the Trustee, before deciding to invest.