What is a Unit Investment Trust?
Definition: unit investing trust
Unit investment trust
Right!
- Definition: unit investing trust
- Unit investment trusts are fixed
- A unit investment trust is an investment that is fixed for the life of the fund
- Difference between a unit investment trust and a mutual fund
- Unit investment trusts return all their assets to investors after selling all of their assets on a fixed maturity date. In addition, their investment portfolios are fixed and never change at the beginning of the fund formation, unless The company goes bankrupt or undergoes other changes. This is the origin of "unmanaged". The goal of a unit investment trust is to generate capital appreciation or dividend income. In the case of unit investment trust bond trusts, they usually pay investors monthly income, which comes from the interest on the bonds, the income from maturing bonds, and so on.
- The term of a unit investment trust also varies according to the type of investment securities. The term of a fixed income trust fund is generally the same as the maturity time of the securities it holds in order to obtain stable coupon interest and repay the principal at maturity. Such as short-term bonds or money market instruments, the term of the fund can be only one year or several months; if investing in long-term government bonds, it may be as long as 20 to 30 years. Equity unit investment trusts generally use dividends and capital appreciation as investment targets, with terms ranging from one to several years. [1]
- The earliest unit investment trust in the United States market was born in 1961, and its golden period of development was in the 1980s and reached its peak in the early 1990s. It is almost twice the current level in terms of volume or asset size. According to the Statistics of the Institute of Investment Companies (ICI), as of the end of 2011, there were a total of 6022 unit investment trusts in the US market. More than half of them were invested in tax-free municipal bonds, and stocks accounted for nearly 40%. The total size of assets under management is about 60 billion U.S. dollars, accounting for only a quarter of them compared with the increasingly small closed-end funds, and it is more marginal compared with the size of mutual funds of 11.8 trillion.
Early investors mostly chose unit investment trust products to invest in fixed-asset tax-free municipal bonds and hold maturity. Since the late 1990s, the situation has reversed. The size of stock trust funds has begun to exceed that of bond types. The years are even more pronounced. This is because with the rise of ETFs and other passive investment products, stock-type unit investment trusts, especially index trusts that replicate the performance of specific market indexes, have attracted more and more net inflows of funds, helping investors to invest more cheaply. Cost-sharing market benefits.