Unit Trusts

Unit Trusts

Unit trusts are a type of investment fund. Your money is combined with that of other investors and used to buy a number of different investments, with the resulting fund being split into equal units. Buying such units can provide a much wider spread of investment than you could have achieved for the same amount of money otherwise.

The money in the fund is invested by a fund manager according to the fund's objectives. Some funds are very general, while others are highly specialised. Most unit trust managers actively pick investments to try and beat a particular benchmark index, but some simply try to track an index, these funds are known as index trackers.

Unit trusts are 'open-ended', meaning that units can be created or cancelled to meet purchases and redemptions as necessary. Because of this the price of units (ignoring charges) trade at 'net asset value', i.e. the value of the fund's assets divided by the total number of units. This avoids the extra layer of risk inherent with investment trusts where the share price can be higher or lower than the net asset value.

OEICS

Open Ended Investment Companies (OEIC) are very similar to unit trusts, except that oeics have a single price at which units are bought and sold while unit trusts have a different price for each. In the help sections when we refer to unit trusts we include OEICs in this generic term.

SICAV

Société d'Investissement À Capital Variable (SICAV) are very similar to OEICs except that they are based out of Luxembourg