Unit Trust

A Unit Trust (UT) is a type of investment fund where money from investors (known as Unit Holders), is pooled together and managed by a professional fund manager to maximise returns. The fund manager invests the money in a variety of assets, such as stocks, bonds, and real estate with the goal of maximising returns. Investors can buy and sell units in the fund, which represent a share of the underlying assets.

How do unit trusts work?

A unit trust is set up under trust law. A fund manager is assigned to invest the money in line with the fund’s objectives, and there’s a trustee in place to safeguard the assets and make sure the fund manager is acting in the best interests of the beneficiaries.

The fund is divided into units, and each investor buys one or more of these units to become a beneficiary. Investors can sell their units if they decide to invest their money elsewhere, and they can usually name a beneficiary who will inherit their units if they die.

The price for each unit depends on the underlying value of the assets (Net Asset Value, or NAV), and this is usually calculated each day. Unlike investment trusts, a unit trust is open-ended. That means the fund will grow and shrink as investors buy and sell units.

Key Features of a Unit Trust

• Pooled Investment Vehicle
• Diversified Portfolio
• Open-end investment vehicles with no fixed number of shares/units available
• As more people invest, more units are created
• Run by investment professional
• Able to distribute income on a pre-determined basis and unable to hold back cash to distribute in leaner years