August 30, 2014

Unit Trust Explained

A unit trust is a commonly popular form of investment fund in the UK. The underlying mechanics of a unit trust is that a large number of investors ‘pool’ their money together of which a unit manager is then in control of. The respective manager will use their expertise to invest the ‘pooled’ money into the financial markets. The unit manager will scour particular industries and financial markets across the world in order to try and deliver maximum growth for your investment. As touched upon, a unit trust divides the pooled money into units. However, the number of units is not fixed and will vary in line with demand, just as the price will. To derive at the unit price, a value is taken of the individual companies that the pooled funds are invested within. From then on, the value of all these companies is divided by the number of units held within the particular fund to provide a unit price. Therefore, unit trusts are always dual priced. This means that they are equated with a different buying and selling price.