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Unit Investment Trust (UIT)

A Unit Investment Trust (UIT) is an investment fund that pools money from investors to purchase a fixed portfolio of securities, typically bonds or stocks, which remains unchanged for the life of the trust. Unlike mutual funds, UITs have a predetermined maturity date, and the securities within the trust are not actively managed. Investors receive a share of income or capital gains generated by the underlying assets, and the trust dissolves when the set date is reached or all assets are sold.

Example

An investor buys units in a UIT that holds a portfolio of municipal bonds. The UIT will pay out interest from the bonds over time, and the trust will terminate when the bonds mature.

Key points

• A fixed portfolio of securities that is not actively managed.

• Investors earn returns from the income and capital gains of the underlying assets.

• Has a set maturity date, at which point the trust is dissolved.

Quick Answers to Curious Questions

UITs have a fixed portfolio and predetermined maturity date, while mutual funds are actively managed and can change their holdings over time.

The assets are sold, and the proceeds are distributed to investors, marking the end of the trust.

UITs provide a fixed portfolio with predictable returns and no active management, making them appealing to investors seeking stability and income over a set period.