Watch Out for Mutual Fund and UITF Fees and Expenses!

(This post discusses fees and charges made by mutual funds and UITFs based in the Philippines.)

So you have decided to invest your hard earned money into a mutual fund and/or a unit investment trust fund (UITF). Make sure you have read and understood each products’ prospectus or fact sheet before you sign the investment application and invest your money.

Make sure you understand the fees and expenses charged to you by the fund company for your mutual fund and the bank for your UITF.

Here are some of the charges for mutual funds:

  • Sales charge ranging from one to five percent of the invested amount. Typically, on the day you buy the fund your invested amount will purchase shares at net asset value (NAV) plus the sales charge. These charges apply every time you purchase additional shares. Fund families usually extend a discount if your total fund holdings across all other funds have reached a certain amount.
  • Redemption fees are charged by fund families when you sell your shares too soon or less than a specific holding period.  Some funds charge the redemption fee for up to two years of your investment.  Fees typically range between half a percent to three percent of the NAV at the day of redemption.
  • Investment advisory, distributor and administration fees are fees charged to the NAV of the fund on a daily basis. As the name suggests the fee covers the advisory, distribution or marketing and daily administration cost of the fund. The lower the fee the more efficient the fund is. If all things are equal always choose the fund with the lowest expense or fees ratio/percentage.  Some funds charge as high as two and a half percent (2.5%) higher than most American mutual funds.  However, some fund companies justify their high fees by saying that a more actively managed fund would incur more expenses as far as trading fees and commissions are concerned. 

Here are some of the charges for UITFs:

  • Sales charges are uncommon but there are a few companies charging a fee for UITFs. The highest I have seen so far is two percent of NAV per unit (NAVPU).
  • Redemption fees are charged by by UITFs but are typically about one to two percent if units are redeemed for less than 15 to 90 days.  However, it is not impossible for a UITF to have a longer minimum holding period.
  • Trust fees are the equivalent of the investment advisory and expense fees in UITFs.  I have noticed that UITFs have a lower fee than mutual funds.  Average trust fee is about one to one and a half percent (1 to 1.5%).

How are the two taxed?

As far as taxes are concerned, capital gains tax is not charged to mutual fund investors. Only when the fund distributes dividends wherein they are required by law to withhold twenty percent (20%) from the gross dividends.  This is probably the reason why Philippine mutual funds don’t give dividends.

UITFs follow the same rules on dividends, wherein there is a 20% mandatory withholding tax.  However, any gain arising from the difference in the buying and selling NAVPU is charged with a 20% withholding tax.

Karl Jenkins and Stabat Mater

I have just received my copy of Karl Jenkins’ new classical album, “Stabat Mater.” I bought it from and had it delivered to my friend’s address in Michigan who was returning to Manila.

Stabat Mater is Jenkins’ rendition of the the medieval Roman Catholic poem. The name comes from the first line of the poem which is, Stabat mater dolorosa (The sorrowful mother was standing). It is a meditative poem on the sorrow of Mother Mary during the crucifixion of Jesus Christ. I has eleven other tracks related to the central theme.

I enjoyed the album. It is so beautifully composed.

Selected lyrics (English translation are italicized):

Cantus Lacrimosus

Stabat Mater dolorosa
Juxta crucem lacrimosa
Dum pendebat Filius.
At the cross her station keeping,
stood the mournful mother weeping, 
close to Jesus to the last. 

Cujus animam gementem
Contristantem et dolentem
Pertransivit gladius.
Through her soul, of joy bereaved,
bowed with anguish, deeply grieved, 
now at length the sword hath passed.

O quam tristis et afflicta
Fuit illa benedicta
Mater unigeniti!
Oh how sad and sore distressed
was that mother highly blessed,
of the sole-begotten One!

Quae maerebat et dolebat,
Pia Mater, dum videbat
Poenas nati incliti.
Christ above in torment hangs; 
She beneath beholds the pangs 
Of her dying glorious Son.

Vidit Jesum in tormentis

Quis est homo qui non fleret,
Matrem Christi si videret
In tanto supplicio?
Is there one who would not weep, 
Whelm’d in miseries so deep
Christ’s dear Mother to behold?

Quis non potest contristari,
Christi Matrem contemplari
Dolentem cum Filio?
Can the human heart refrain
From partaking in her pain,
In that Mother’s pain untold?

Pro peccatis suae gentis
Vidit Iesum in tormentis,
Et flagellis subditum.
For the sins of His own nation,
she saw Jesus wracked with torment,
all the scourges rent.

Vidit suum dulcem natum
Moriendo desolatum
Dum emisit spiritum.
She behold her tender Child,
saw Him hang in desolation,
till His spirit forth He sent.

Eia Mater, fons amoris
Me sentire vim doloris
Fac, ut tecum lugeam.
O thou Mother! fount of love!
Touch my spirit from above,
make my heart with thine accord.

Fac, ut ardeat cor meum
In amando Christum Deum
Ut sibi complaceam.
make me feel as thou hast felt;
make my soul to grow and melt
with the love of Christ my Lord.

Sancta Mater

Sancta Mater, istud agas,
Pone nostro ducas plagas
Cordi fixas valide.
Holy Mother! pierce me through;
In my heart each wound renew
Of my Saviour crucified.

Tui nati coelo lapsi,
Iam dignati foeno nasci,
Poenas mecum divide.
Let me share with thee His pain,
Who for all my sins was slain,
Who for me in torments died.

Fac me tecum congaudere
Iesulino cohaerere
Donec ego vixero
Let me mingle tears with thee,
Mourning Him who mourn’d for me,
All the days that I may live.

Juxta crucem tecum stare,
Et me tibi sociare
In planctu desidero.
By the cross with thee to stay,
There with thee to weep and pray,
Is all I ask of thee to give.

Rich migrants put off by NZ immigration rules

New Zealand Herald: Rich migrants put off by rules
By Lincoln Tan and Simon Collins (2 August 2008) 

Excerpt: Investors are turning their backs on New Zealand as a place to live and bring their money.

The number of approved investor migrants dropped from 1326 in 2002 to one this year, members of the New Zealand Association for Migration and Investment heard yesterday. Continue Reading.