|
Note: the Unit Trust (UT) is a separate mainly UK fund type. Note: the Unit Investment Trust (UIT) is a separate US fund type. ...
A Unit Investment Trust (UIT) is an US investment company offering a fixed portfolio of securities with a fixed termination date upon which the company is liquidated. In finance, a portfolio is a collection of investments held by an institution or a private individual. ...
Security is a type of transferrable interest representing financial value. ...
UITs are assembled by a sponsor and redeemable units are offered via an intital public offering (IPO). Units are then traded either via the sponsor or through brokers to make a secondary market. The portfolio is not actively managed, new securities are not normally added to the portfolio during the life of the trust. UITs may create more units (for example: to allow investors to reinvest dividend income) and by law they must allow units to be redeemed at the net asset value (Source: ICI). In this way they may be considered open-ended, but they have significant diffences from mutual funds. In commerce, a broker is a party that mediates between a buyer and a seller. ...
In the context of mutual funds, net asset value is the total value of the funds portfolio less liabilities. ...
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, and/or other securities. ...
Unit Investment Trusts are one of three basic types of investment company available in the US. (Click here for US SEC description of investment company types). An investment company is a company whose main business is holding securities of other companies purely for investment purposes. ...
Some exchange-traded funds (ETFs) are structured as UITs. Exchange-traded funds, or ETFs, are a relatively new type of security that exhibits some qualities of a stock and some qualities of a mutual fund. ...
Assets A UIT portfolio may consist of nearly any type of security. The main distinction in security types is between debt instruments and equity instruments. Debt instruments include bonds and mortgages. Equity instruments are stocks. Income from debt-based UITs is classified as interest, while income from equity-based UITs is classified as dividends.
A UIT may be constituted as either a Regulated Investment Corporation (RIC) or a Grantor Trust. A RIC is a corporation in which investors are joint owners. A Grantor Trust, in contrast, grants investors proportional ownership in the underlying securities.
Investment goals UITs exist for most investment goals. Portfolio compositions range from insured municipal bonds (low risk, low return) to index-based equity funds (low-to-moderate risk, fair return) to "sector funds" (risk and return based on sector). Municipal bond funds may be concentrated in one state for tax advantages, or distributed throughout many states for portfolio security through geographical diversity. Bonds may, alternately, be selected by theme (e.g., public utility bonds). Index-based funds purchase all or a professionally selected subset of the stocks which constitute an index such as the Dow Jones Industrial Average or the Standard & Poor 500. Sector funds include funds concentrating on such areas as telecommunications, medical technology, and internet companies.
Creation A UIT is created by a document called the Trust Indenture. This document is drafted by the Sponsor of the fund, and names the Trustee and the Evaluator. By US law, the Sponsor and the Trustee may not be the same. The sponsor selects and assembles the securities to be included in the fund. The trustee keeps the securities, maintains unitholder records, and performs all accounting and tax reporting for the portfolio. Major sponsors include First Trust, Nuveen, Van Kampan, and Claymore Securities. Most large brokerage firms (such as Merrill Lynch and A. G. Edwards) sell UITs created by these sponsors.
See also A collective investment scheme is a way of investing money with other people to participate in a wider range of investments than may be feasible for an individual investor and to share the costs of doing so. ...
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, and/or other securities. ...
External links | 
Feeds |
Contact