unit trust


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Unit trust

In the United Kingdom and other foreign markets, an open-end mutual fund.

Unit Trust

A British term for an open-ended mutual fund. See also: OEIC.

Unit trust.

The category of investment known as a mutual fund in the United States is called a unit trust in other parts of the world.

unit trust

a financial institution which specializes in investment in FINANCIAL SECURITIES on behalf of its ‘unit’ holders. Some unit trusts offer a single fund, but more usually they operate a number of funds catering for different investment requirements. Unit trusts pool together the monies of a large number of investors which they use to purchase a varied portfolio of investments, mainly UK and overseas corporate stocks and shares and government fixed-interest securities. They are ideal for smaller investors who wish to secure a wider spread of risk than they could achieve for themselves by direct investment in a limited number of securities, or who require professional management of their investments.

Unit trusts issue ‘units’ in their funds to buyers, and repurchase units from sellers on the basis of a bid price (lower, for buying) and an offer price (higher, for selling). An initial management charge is required of buyers, followed by a smaller annual charge. The value of the individual units in a fund is obtained by dividing the total value of the fund investments plus cash held, by the number of units in existence every day. A fund which is growing will need to create new units, while one in decline will liquidate units on redemption. The value of the total investments of a fund is determined by the value of the securities it holds and the fund's valuation, and hence unit prices can go up or down with the ebb and flow of STOCK MARKET prices in general. Unit trusts usually offer investors a variety of funds to choose from, ranging from general funds which aim at a balance between current income and capital growth, to those specialized in achieving either capital growth or high current income.

The unit trust movement in the UK is represented by the UNIT TRUST ASSOCIATION (UTA) which provides a forum for the discussion of matters of general concern to members, and acts on behalf of members in dealings with other institutional bodies such as the Institutional Investors Committee and the government. The investment and management of funds by unit trusts are regulated by the FINANCIAL SERVICES AUTHORITY in accordance with various standards of good practice laid down under the FINANCIAL SERVICES ACT 1906. See INSTITUTIONAL INVESTORS, FINANCIAL SYSTEM, INSURANCE COMPANY.

unit trust

a financial institution that specializes in investment in FINANCIAL SECURITIES on behalf of its unit holders. Some unit trusts offer a single ‘fund’, but more usually they operate a number of funds catering for different investment requirements (for example, high income, capital growth). Unit trusts pool together the monies of a large number of investors which they use to purchase a varied portfolio of investments, mainly UK and overseas corporate stocks and shares and government fixed-interest securities. They are ideal for smaller investors who wish to secure a wider spread of risk than they could achieve for themselves by direct investment in a limited number of securities, or who require professional management of their investments.

Unit trusts issue ‘units’ in their funds to buyers and repurchase units from sellers on the basis of a ‘bid’ price (lower, for buying) and an ‘offer’ price (higher, for selling). An initial management charge is required of buyers, followed by a smaller annual charge. The value of the individual units in a fund is obtained by dividing the total value of the fund investments plus cash held by the number of units in existence every day.

The unit trust movement in the UK is represented by the Unit Trust Association (UTA), while the investment and management of funds by unit trusts is regulated by the FINANCIAL SERVICES AUTHORITY in accordance with various standards of good practice laid down under the FINANCIAL SERVICES ACT 1986. See INSTITUTIONAL INVESTORS, FINANCIAL SYSTEM, PORTFOLIO, TRACKER FUND, INDIVIDUAL SAVINGS ACCOUNT.

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