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Why is a unit trust called a unit trust?
Key takeaways
- The name unit trust fund comes from the fact that the investments made by such a fund are held in a trust and the fund is divided into equal units.
The word trust in “unit trust” refers to the fact that your money and that of other investors is pooled and securities in which the fund invests are held in a legal trust structure to make sure they are ringfenced and protected should anything go wrong with the unit trust management company.
The pooled money is divided into equal units (in legal terms known as participatory interests) each containing the same proportion of each investment held by the fund.
The value of the units (their net asset value) depends on the price of investments in the fund less certain costs – known as permissible deductions - such as the cost of trading, auditing and custodian fees. Read more How is your unit trust priced?
Depending on how much you invest and the value of each unit when you invest, you will be allocated a certain number of units in the fund.
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Unit trusts are called mutual funds in other parts of the world. The name was introduced in the 1930s with the first US investment company to invest the money of its shareholders in a diversified group of shares of other companies. |
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