A unit trust is a mutual fund that allows any profits to be given to an individual investor rather than the profits being reinvested. The chances of the unit trust being successful depends almost entirely on the expertise and abilities of the management company. A unit trust is mainly used to pool capital from many investors into to create a larger fund.
How it works?
A management company pools together capital from many different investors into a mutual fund which creates a much larger fund. This larger mutual fund, which consists of a fixed currency, is broken into a number of units which is decided by a select committee or from a main board of company executives. These units then rise, and fall, with the stock market and any profits are given to individual investors rather than being reinvested into the fund. The company makes money through the employment of a management fee and possibly a percentage of the profits. After every portfolio valuation, a box manager decided whether the portfolio should have units created (added) or liquidated (removed) from the portfolio.
- 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.
Structure – source: https://en.wikipedia.org/wiki/Unit_trust