Thursday, March 17, 2011

What are Unit Trusts?



A unit trust is a form of collective investment constituted under a trust deed. Unit trusts represent the pooled resources of thousands of investors who have entrusted their money to a management company.
The management company buys shares on the Stock Exchange on behalf of the investors. The trust does not give the shares to the investor, but combines them in a portfolio.
The management then divides the portfolio into many equal "units." The investor receives a certain number of units for the money he has entrusted to the company that manages the unit trust.
Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. Each fund has a specified investment objective to determine the management aims and limitations.

Structure of Unit Trusts 
  • The fund manager runs the trust for profit.
  • The trustees ensure the fund manager keeps to the fund's investment objective and safeguards the trust assets. 
  • The unitholders have the rights to the trust assets. 
  • The distributors allow the unitholders to transact in the fund manager's unit trusts 
  • The registrars are usually engaged by the fund manager and generally acts as a middleman between the fund manager and various other stakeholders. 
 
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