There may come a time in your investing journey when you’ll want to withdraw some or all of the money you placed in a Unit Investment Trust Fund (UITF). Also known as redeeming your investment, this is a straightforward process. You’ll just need to decide how much you want to withdraw, in either pesos or units.
For the latter, remember that the value of your initial investment is converted to its unit equivalent according to the Net Asset Value Per Unit or NAVPU when it was processed.
But how does the whole process work? Read on to find out what goes on for both the fund and you.
Where the money comes from
When you invest in a fund, its manager will use your money to buy assets to add to the fund's portfolio, while at the same time, keep a portion in cash for liquidity to accommodate potential redemption. That's why when you withdraw from your investment, the fund manager will either use the cash portion or sell some assets so that the units you own can be bought back from you.
This all means that, whenever you want to get money from your investment, it will always be available for you.
This isn’t the only time that the fund manager will sell some assets. In fact, selling and buying of assets are done even when nobody withdraws their money, as part of the fund’s strategy. How often this happens depends on if the fund is actively or passively managed, as well as the market conditions.
After making the transaction
After you finish the withdrawal process, the fund manager will receive your order and process it. The time needed for this step can vary according to the type of fund and the policies it has.
The duration is also affected by the time that you start the process. UITFs have a cut-off time for processing to begin on the same day you made the redemption (this could also be the next day, depending on the specific fund). If you transact after the cut-off, your request will be processed on the next banking day.
This has an impact on the settlement date, which is when the money you withdrew is credited to your settlement account. Each fund’s redemption settlement date varies, and ranges from the same day (T+0) to 7 days from date of redemption (T+7).
Remember also that, if you choose to pull out the full value of your investment or if you did a partial or full withdrawal with units as your basis, there’s a chance that the amount you receive won’t be the same as the one you saw when you made the transaction.
That’s because the value of your investment is based on the NAVPU, which is calculated at the end of the day. If the NAVPU used for your withdrawal (according to the time you made it) is different from the NAVPU when you began the transaction, the actual value will change.
Once all processes are complete, you’ll receive the amount in your settlement account. You can then use it for its purpose, or reinvest it to grow your money further, or to diversify your portfolio.
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