Unit trusts are types of collective investment schemes where investors with the same investment objectives pool their financial resources together for the purpose of making large scale investments within the scope of the investment objective. These financial resources are managed by an independent manager.
Unit trust schemes involve three parties: the manager, the trustee, and the investors (who are also the unit holders).
Common types of unit trust schemes include:
- Money Market Funds are generally very low-risk funds offering moderate returns. They have a primary objective of investing in short term debt securities (securities that mature in less than one year ) such as treasury bills;
- Fixed Income Funds are also low-risk, but provide investors with regular income. Investments are usually in debt securities that pay regular interests or dividends such as bonds and preference shares;
- Equity Funds which invest primarily in shares of companies.
Advantages of investing in a unit trust scheme
- Gives an investor access to investment opportunities that are not available to individual investors;
- The scheme is managed by professionals who have access to specialised market information and analysis;
- Enables investors to be able to participate in a professionally managed portfolio of investment without having to expose a large sum of money through direct investments in securities;
- Gives investors the opportunity of realising all or part of their unit holding during the normal business hours of the management company.