A unit trust is a form of collective investment where money from multiple investors is pooled together to create a diversified portfolio of assets such as stocks, bonds, money market instruments, and other securities. Investors buy "units" in the trust, which represent their proportional ownership of the underlying assets. The fund is managed by professional fund managers who make investment decisions on behalf of the investors
. Key characteristics of unit trusts include:
- They are established under a trust deed, with investors as beneficiaries.
- The fund is open-ended, meaning new units are created when more money is invested, and units are redeemed when investors withdraw their money.
- The price of each unit is based on the net asset value (NAV) of the fund divided by the number of units outstanding.
- Fund managers earn fees for managing the fund, and the trust's profits are either distributed to investors or reflected in the unit price as capital gains.
- Unit trusts offer diversification, professional management, and accessibility to a wide range of asset classes without requiring investors to buy individual securities directly
Unit trusts are popular investment vehicles in many countries, including the UK, Malaysia, Singapore, Australia, and South Africa, among others
. In summary, a unit trust allows individual investors to pool their money to invest in a professionally managed, diversified portfolio, providing an accessible way to participate in the financial markets with managed risk
