22/09/2025
Some people say, "Based on annual reports, Iโve never seen VUL funds performing well"...I often read this from anti-VUL people who are disappointed with the performance, especially those who assumed that all of their premium goes straight into investment. But thatโs not how VULs work. Part of the premium goes to insurance charges and other policy costs, while the rest is invested into the fund.
Also, itโs important to understand that an annual report showing unit price growth or decline doesnโt necessarily reflect a policyholderโs actual fund value performance. Why? Because the fund report only compares the unit price from one point in time to another. But in reality, most clients pay monthly, not annually. That means they buy units at different prices throughout the year โ sometimes higher, sometimes lower. This variation (peso-cost averaging) makes their actual experience different from the headline annual unit price movement. In many cases, clients can still grow their fund value even if the annual unit price looks flat or down.
Okay, let's break it down, shall we?
1. Annual Unit Price vs. Fund Value
Unit Price Growth/Decline (Annual Performance):
This simply measures how the fundโs price per unit has changed from one point in time to another (e.g., from January 1 last year to January 1 this year).
Example:
Start of year: โฑ10 per unit
End of year: โฑ11 per unit
โ Thatโs +10% growth, regardless of how it moved in between.
Fund Value (What the client sees in their account):
This depends not only on the unit price but also on how many units they own and WHEN THOSE UNITS WERE BOUGHT.
2. Impact of Monthly Payments (Peso-Cost Averaging)
If a client pays monthly premiums, theyโre not buying all units at one fixed price. Instead, they buy units at different prices throughout the year:
January: โฑ10 per unit
March: โฑ9.50 per unit
July: โฑ11 per unit
November: โฑ10.80 per unit
This means their average cost per unit could be very different from the yearโs start or end price.
So even if the annual unit price looks flat (no growth or slight decline), the clientโs actual fund value MIGHT still grow โ because they were able to buy more units during dips (cost averaging). Conversely, if unit prices rose steadily, their growth may look smaller than the headline annual % change, since they bought units at increasingly higher prices.
3. Why the Numbers Donโt Always Match
Annual report unit price growth = snapshot comparing two points in time.
Clientโs fund value performance = blended result of many purchases at varying prices.
In other words:
Unit price growth shows how the fund itself performed.
Fund value growth shows how the client experienced the fund, depending on payment frequency and timing.
โ
Analogy:
Itโs like saying the price of rice went from โฑ100/kilo to โฑ110/kilo (+10%).
But if you bought a kilo of rice every month at โฑ95, โฑ105, โฑ108, etc., your average buying price is different from those two endpoints. Your โpersonal gainโ on mangoes wonโt exactly match the reported +10%.
๐ So the recorded annual unit price growth/decline is useful for understanding fund direction, but it doesnโt directly measure the policyholderโs personal return, especially for monthly-paying VULs where entry points vary across the year.
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