SB Dollar Bond Fund

SB Dollar Bond Fund (formerly “SB Secure Dollar Fund”) aims
to achieve competitive returns through prudent and active management
of the portfolio, comprised mainly of US Dollar-denominated fixed income
and related securities/investments.

About the Fund

SB Dollar Bond Fund (formerly “SB Secure Dollar Fund”) aims to achieve competitive returns through prudent and active management of the portfolio, comprised mainly of US Dollar-denominated fixed income and related securities/investments. The Fund aims to surpass its benchmark which is 90% JP Morgan Asia Credit Total Return Index Philippines + 10% O/N USD Time Deposit.

Client Suitability

SB Dollar Bond Fund is suitable only for investors who:

  • Have a moderate risk tolerance
  • Have an investment horizon of at least one (1) year
  • Are aware of potentially higher returns in US Dollar denominated fixed income securities apart from regular Dollar bank time deposits.

Note: The NAVPU shall be computed at the end of each Banking Day and shall be made available to investors the following Banking Day

Why Invest in our UITFs?

Diversification

Investments (and risk) are spread across
various asset baskets industry wide.

Liquidity

You can subscribe and redeem on
any banking day.

Affordability

You can start investing in UITFs
with just P10,000.

Professional Fund Management

Seasoned fund managers constantly
monitor markets for opportunities.

Transparency

You can check the value of your
investment daily with NAVPU.

Regulated Product

Management and regulation of UITFs are
governed by the Bangko Sentral ng Pilipinas.

Key Risks and Risk Management

Interest Rate Risk – This is the possibility for the Fund to experience losses due to changes in interest rates. The purchase and sale of a debt instrument may result in profits or losses because the value of a debt instrument changes inversely with prevailing interest rates. The Fund’s investment portfolio, being marked-to-market, is affected by the changes in interest rates thereby affecting the values of the fixed-income investments of the Fund such as government securities and corporate bonds. Interest rate changes may affect the prices of fixed income securities inversely, i.e. as interest rates rise, bonds prices fall and when interest rates decline, bond prices rise. As the prices of the bonds held by the Fund adjust to a rise or a drop in interest rates, the Fund’s share price measure by the NAVPU will decline or increase accordingly.

Market/Price Risk – This is the possibility for the Fund to experience losses due to changes in market prices of equities or bonds. It is the exposure to the uncertain market value of these investments due to price fluctuations. It is the risk of the Fund to lose value due to a decline in securities prices, which may sometimes happen rapidly. The value of investments fluctuates over a given time period because of general market conditions, economic changes, or other events that impact large portions of the market such as political events, natural calamities, etc. As a result, the NAVPU may increase to make a profit or decrease to incur a loss.

Liquidity Risk – This is the possibility for the Fund to experience losses due to the inability to sell or convert the investments into cash immediately or in instances where conversion to cash is possible but at a loss. This may be caused by different reasons such as trading in securities with small or few outstanding issues, absence of buyers, limited buy/sell activity or an underdeveloped capital market. Liquidity risk occurs when certain investments in the Fund’s portfolio may be difficult or impossible to sell at a particular time which may prevent allowing withdrawal from the account with until its assets can be converted to cash. Even government securities which are the most liquid fixed income securities may be subjected to liquidity risk particularly when a sizeable volume is involved.

Credit Risk/Default Risk – This is the possibility for the Fund to experience losses due to a borrower’s or issuer’s failure to pay principal and/or interest in a timely manner on instruments such as bonds, loans, or other forms of security which the borrower issued. This inability of the borrower/issuer to make good on its financial obligations may be a result of adverse changes in its financial condition, thus, lowering credit quality of the security, and consequently lowering the price (market/price risk) which contributes to the difficulty in selling such security in the open market (liquidity risk). The decline in the value of the Fund happens when the default/failure of the issuer to pay its obligation would make the price of the security go down and may make the security difficult to sell. When this happens, the Fund’s NAVPU will be affected by a decline in value.

Counterparty Risk – This is the possibility for the Fund to be exposed to risks relating to the credit standing of its counterparties and to their ability to fulfill the conditions of the contracts it enters into with them. In the event of a bankruptcy or insolvency of a counterparty, the Fund could experience delays in liquidating the position and incur losses, including declines in the value of its investment during the period in which the fund seeks to enforce its rights, inability to realize gains on its investment during such period and fees and expenses incurred in enforcing its rights under the contracts. There is also a possibility that the above contracts are terminated due, for instance, to bankruptcy, supervening illegality or change in the tax or accounting laws relative to those at the time the contracts were originated.

Reinvestment Risk – This is the risk associated with the possibility of having lower returns or earnings when maturing funds or the interest earnings of funds are reinvested. Investors in the UITF who redeem and realize their gains run the risk of reinvesting their funds in an alternative investment outlet with lower yields. Similarly, SBC-Trust is faced with the risk of not being able to find good or better alternative investment outlets as some of the securities in the fund matures.

In the case of foreign currency-denominated security or in case investing in Target Funds through Feeder Funds that are foreign currency denominated funds, the UITF is also exposed to the following risks:

Foreign Exchange Risk – This is the possibility for the Fund to experience losses due to fluctuations in foreign exchange rates. The exchange rates depend upon a variety of global and local factors such as interest rates, economic performance, and political developments. It is the risk of the Fund to currency fluctuations when the value of such investments denominated in currencies other than the base currency (Peso) depreciates. Conversely, it is the risk of the Fund to lose value when the base currency (Peso) appreciates. The NAVPU of a peso-denominated Fund invested in foreign currency-denominated securities may decrease to incur losses when the peso appreciates.

Country Risk – This is the possibility for the Fund to experience losses arising from investments in securities issued by/in foreign countries due to changes in the political, economic, and social structures of such countries. There are risks in foreign investments due to the possible internal and external conflicts, currency devaluations, foreign ownership limitations, and fiscal/monetary policies of the foreign country involved which are difficult to predict but must be taken into account in making such investments.

Emerging Markets Risk – The possibility for the Fund to invest in less developed or emerging markets. Investing in emerging markets may carry a higher risk than investing in developed markets. The securities markets of less developed or emerging markets are generally smaller, less developed, less liquid and more volatile than the securities markets of developed markets. The risk of significant fluctuations in the Net Asset Value and of the suspension of redemptions in these types of funds may be higher than for funds investing in major markets.

Equity Risk – The value of the Fund that invests in equity and equity-related securities will be affected by the economic, political, market, sectoral, and issuer-specific changes. Such changes may adversely affect securities, regardless of the Fund’s specific performance. Additionally, different industries, financial markets, and securities can react differently to these changes. Such fluctuations of the Fund’s value are often exacerbated in the short-term as well. The risk that one or more companies in the Fund’s portfolio will fall, or fail, or rise, can adversely affect the overall portfolio performance in any given period.

Stock Market Cyclical and Concentration Risk – Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices that will affect the Fund’s performance. In addition, the Fund’s targeted actual index may, at times, become focused in stocks of a particular market sector, which would subject the Fund to proportionately higher exposure to the risks of that sector.

Index Sampling Risk – The possibility that the securities selected for the Fund, in the aggregate, will not provide investment performance matching that of the Fund’s targeted actual index and its respective composition given the margin of variance allowed for the Fund.

Frequently Asked Questions

1. What is a UITF?

A UITF (or Unit Investment Trust Fund) is an open-ended pooled trust fund denominated in pesos or any acceptable currency, which is operated and administered by a trust entity. Each UITF Fund is governed by a Declaration of Trust (or Plan Rules) which contains the mechanics for investing, operating, and administering the fund. The funds are then invested by a team of professional portfolio managers in various other deposits and securities. Individuals and institutions take part in the UITF by purchasing units of participation in the fund.

2. What is the difference between Mutual Fund and UITF?

UITFs and Mutual Funds are both investment vehicles where you join other investors and companies to pool a fund, which will be handled by a professional fund manager. This fund will be invested in a diversified basket of stocks, bonds, and other similar funds. Investing in UITFs buys you units in the fund while investing in Mutual Funds buys you shares. In addition, most Mutual Funds charge a front-end load, which can be as much as 2% of the initial investment, while UITFs typically do not.

3. What are the fees involved?

The trustee shall charge the fund for management fees, taxes and qualified expenses. The trust fee shall differ for each type of fund and will cover the costs of investment research, management, marketing and routine administrative expenses of the trustee. Note that the taxes are already withheld by the trustee so the NAVPU is already net of fees and taxes.

4. What are the risks of investing in a UITF?

Because the assets of the UITF are valued based on the prevailing market price, there is a possibility that investments in the fund may go up or down. There are no guarantees of principal nor income. Losses, if any, shall be for the risk of the UITF investors. UITFs are governed by BSP regulations but are not deposit products, hence are not covered by the Philippine Deposit Insurance Corporation (PDIC).

5. What does “open-ended pooled trust fund” mean?

A UITF is an open-ended investment, meaning the fund will continue to be managed with no predefined term or termination date. It is up to the investor to determine how long he wants to keep his funds invested.

6. What does “made available by participation” mean?

A client invests in a UITF by purchasing units of participation in the fund. The units of participation represent the investor’s proportionate share in the total value of the fund. As an investor in the fund, the client does not own any specific asset of the fund, only a proportionate share in all of the fund’s assets.

7. How is a fund different from a bank deposit?

There are several major differences between UITF investments and bank deposits. First, the UITF is a trust product and is managed by the Trust Department of the bank. Second, investments in the UITF are marked to market. Their value can go up or down on a daily basis, depending on the market value of the underlying investments. Third, there is no guaranteed rate of return that the fund will provide. For reference, the fund’s past performance is available. However, it is important to note that past performance is not necessarily indicative of future performance. Fourth, as a result of the daily fluctuations in market value, the principal is not protected. Fifth, the UITF is not covered by PDIC Insurance.

8. How can an investor compare the performance of the trustee versus other trust entities?

All trust entities offering UITF products are required to publish the fund’s prevailing NAVPU as well as the year-on-year and the year-to-date return on investment in major dailies at least once a week. The investor should, however, compare performance of products with similar investment parameters for a more objective evaluation.

9. How is a UITF valued?

  • The UITFs are valued using the mark to market (MTM) method. The term “mark to market” means that the underlying investments of the fund are valued at “fair market value” or the current price at which that asset can be bought or sold. With MTM, investors get an accurate indication of what their units are currently worth.
  • Net Asset Value (NAV) – The Net Asset Value of the fund is the sum total of all the funds’ underlying assets less fees and liabilities.
  • Net Asset Value per Unit (NAVPU) – The NAVPU represents the price per unit of participation. It is computed as the NAV divided by the total number of units of participation in the fund.

10. Which NAVPU is used when I subscribe or redeem?

When an investor subscribes to the fund, the number of units that he will obtain will be based on the NAVPU that will be released at the end of the banking day. Similarly, when an investor redeems, the NAVPU that will be used for computing the redemption proceeds is the NAVPU that will be published at the end of the day.

11. Can a client invest in more than one type of UITF?

Yes. Clients may diversify their investments across various UITFs as long as the funds are in line with their own investment objective and they can tolerate the risks involved with the funds.

12. Which type of UITF is suitable to an investor?

When choosing a UITF, an investor should identify their needs and goals and match them against the investment parameters of the product. To determine the clients’ suitability to a fund, the following factors have to be considered: investment capacity, or the amount available for investment; investment horizon, or how long a client can stay in the fund; risk profile, or how much price volatility the client is willing to take; and investment objective; whether client wants income or capital growth.

13. Is there an indicative or guaranteed rate of return for UITF products?

No. Since UITFs are subject to the mark to market valuation method, the NAVPU may fluctuate depending on the volatility of the market. The return figures published by Security Bank only represent how the fund has performed in the past. This does not necessarily mean that the fund will give the same return over a similar period of time in the future.

14. How do investors keep track of the value of the UITF investment?

After subscribing into the UITFs, the client will receive a Confirmation of Participation or COP which states the total number of units that the investor was able to buy, and at what NAVPU those units were bought at. The investor can find out the value of his current investments by multiplying the total number of units he holds by the latest available NAVPU, which is published daily on the Security Bank website at https://www.securitybank.com/market-information/navpu/

15. When does the investor get the proceeds of the UITF investment?

Payment to the investor will depend on the settlement period prescribed by the trustee. This may vary depending on the nature and settlement convention of the investments of the UITF product.

16. In what instruments can a trustee invest the fund?

The character and kind of investments which may be made by the trustee depend on the investment parameters set forth in the UITF Declaration of Trust or Plan Rules. BSP Regulations, however, prescribe that UITF fund investments shall be limited to bank deposits, securities issued by or guaranteed by the Philippine government or the BSP, tradable securities issued by the government of a foreign country, any political subdivision of a foreign country or any supranational entity, exchange listed securities, marketable instruments that are traded in an organized exchange, loans traded in an organized market, such other tradable investments as the BSP may allow.

Disclaimer: [1] The contents herein are intended for qualified investors or buyers and not for the financially unsophisticated investors. This material is not intended to be comprehensive and does not purport to contain all the information that a prospective investor may require. The investor should not rely solely thereon without making any independent analysis or research on the topic therein. This material is not intended as a substitute for sound investment or risk management advice. No representation or warranty as to its accuracy, reasonableness or completeness, express or implied is hereby made. Past performance is not indicative of future returns. Returns may fluctuate depending on market price movements. In no case shall this material be taken as an offer to engage in investment or trading. The contents are herein subject to change without prior notice. [2] The NAVPU is only indicative of the value of investment as of a certain date. However, for redemption, please note that the NAVPU will be not be known until the end of a certain business date. [3] Investments in UITFs are trust agreements, not deposit accounts. They do not have a guaranteed rate of return and are not insured by the Philippine Deposit Insurance Corporation (PDIC). Any loss or income of the fund is for the account of the Trustor/Investor. Historical performance, when presented, is purely for reference and not a guarantee of future results. Charges made against the fund are in the form of trust fees, taxes and qualified expenses. The Trustee (Security Bank – Trust Division) is not liable for the losses except for gross negligence, fraud or bad faith.

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