BSP to set benchmark for UITFs

MANILA, Philippines — The Bangko Sentral ng Pilipinas is set to establish a common framework across the trust industry on benchmark selection as assets under management (AUM) nears the P5 trillion level.

BSP Governor Benjamin Diokno said the AUM of the trust industry jumped by 25 percent to reach almost P5 trillion as of end-September last year compared to the level prior to the pandemic.

Diokno told members of the Fund Managers Association of the Philippines (FMAP) during their recent general membership meeting that unit investment trust fund (UITF) assets grew by 22 percent to P1.3 trillion as of end- September last year.

“The continued surge in UITFs in terms of both volume and number of participants has propelled the growth of the trust industry. The accessibility of UITFs via various digital platforms significantly contributed to the growth,” the BSP chief said.

As such, Diokno said the regulator continues to enhance the regulatory framework and push policy reforms under the trust business model initiative, digitalization and sustainable finance.

UITFs are open-ended trust funds in the form of money market funds, bond funds, balanced funds, and equity funds, among others that could be in peso or other acceptable currency.

Diokno said the regulator is coming up with an issuance under the trust business model initiative involving the guidelines on performance measurement.

“This shall set out the BSP’s expectations on the selection of benchmarks for UITFs, based on the principles of fair representation and full disclosure. The issuance aims to establish a common framework across the trust industry on benchmark selection and ensure that clients are provided with the necessary information for them to adequately assess fund performance,” he said.?

The BSP also urged FMAP to accelerate their own digital transformation journeys as the country actively moves toward a more digital society.

“Digitalization can reduce distribution costs and make financial transactions faster and more convenient. Financial institutions can also employ digital means to serve several clients simultaneously, thus expanding reach,” he said. ?

According to the BSP, it has issued the Sustainable Finance Framework advocating for the integration of sustainability or environmental, social, and governance (ESG) principles into the operations of supervised institutions.

“While the formal framework is specifically geared toward banks, we strongly encourage fund managers to consider environmental and social risks in your operations as well,” Diokno said.?

Some fund managers already offer ESG funds, with three related UITFs currently available in the domestic market. These had an aggregate AUM of P633.8 million as of end-September last year.

“Given the strong value proposition of ESG-related financial products, the BSP expects fund managers to be diligent in ensuring that your chosen investment outlets adhere to the ESG investment standards. This entails sufficient evaluation of the issuers’ sustainability-related commitments,” he said.