Introduction to Unit Trusts
2009 January 17
Unit Trusts are a type of collective or pooled investment. An investor can contribute to a Unit Trust by either a lump sum or by regular contributions or a combination of the two. The Unit Trust is divided into units with each unit forming a tiny fraction of the total assets. Trusts are open ended which means that a fund manager can create more units if demand dictates. The fund manager is obliged to buy back units from investors.
In order to ensure that Unit Trusts have a wide variety of shares a trust cannot hold more than 10% of it’s value in any one share. In addition only 4 companies can have shares up to the 10% limit. Shares in other companies must not exceed 5% of the fund value.
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