On 9 August 2023, the Bangko Sentral ng Pilipinas ("BSP") issued BSP Circular No. 1178, Series of 2023 ("Circular"). The Circular provides guidelines on the use of benchmarks in assessing the returns of Unit Investment Trust Funds ("UITF") to enable UITF participants to gauge the performance of their funds vis-à-vis a comparable market indices or portfolios. It aims to protect investors by providing them with more information to make sound financial decisions given that UTIF participants are now mandated to present the performance of their funds in a more transparent manner.
Under the Circular, a valid benchmark for a UTIF has the following characteristics: (i) has a clearly defined objective; (ii) appropriately reflects the market or sector it aims to represent; (iii) comprised of sufficiently diversified financial instruments that are liquid; (iv) objectively and consistently calculated; (v) is a total return benchmark; and (vi) reflects returns that are net of taxes.
If the appropriate benchmark does not satisfy items (v) and/or (vi), the trustee shall disclose this in a Key Information and Investment Disclosure Statement ("KIIDS"). The KIIDS shall contain the key features of the UITF, its performance against a benchmark, and its prospective and outstanding investments.
The Circular also provides for a one-year transitory period for trust entities to review the benchmarks of their existing funds.
