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Unit Trust

A unit trust is a type of collective investment where investors’ funds are pooled together to invest in a diversified portfolio of securities, such as stocks, bonds, or real estate. A unit trust is structured as a trust, and investors hold units that represent their share of the underlying assets. Unit trusts are popular in the UK and some other countries, and they are managed by a fund manager who decides which securities to buy and sell.

Example

An investor buys units in a unit trust that focuses on UK blue-chip stocks, gaining exposure to a diversified portfolio managed by a professional fund manager.

Key points

• A collective investment scheme where investors buy units representing a share of a pooled portfolio.

• Managed by a professional fund manager who makes investment decisions on behalf of unit holders.

• Common in countries like the UK and offers diversification across asset classes.

Quick Answers to Curious Questions

While both pool investors’ money, unit trusts are structured as trusts, and units are issued to represent ownership, whereas mutual funds issue shares.

The fund manager is responsible for making investment decisions, such as which securities to buy, hold, or sell, to meet the trust’s objectives.

Unit trusts provide diversification, professional management, and access to a wide range of securities, making them an attractive option for individual investors.