The main purpose behind these constraints is to ensure that the investments held in a fund's portfolio are easily realisable.

This in turn enables the managers to buy and sell units at any time.

Buying and selling units: Units can be bought either directly from the managers or through an agent such as a stockbroker, bank, solicitor or accountant. They can also be bought through any of the offers that frequently appear in newspapers.

The buying price of units offered for sale through advertisement is usually fixed until the closing date for the offer specified by the managers. Units bought after the closing date are allocated at the offer price ruling on receipt of the investor's cheque. Units in new trusts are also often offered to the public at a small discount or with a special bonus.

For example, one unit trust launched recently offered a bonus in the form of additional units, depending on the amount invested. If units are bought through an agent, his commission normally comes out of the manager's initial service charge. The UTA currently recommends that a rate of 1.25% should be paid to all agents.

Units can be sold back to the managers of the trust by contacting the managers themselves or through an agent. The price at which the managers will buy back units is controlled by the DoT. No commission is paid by the manager when units are sold back, so it could be cheaper to sell directly to the managers rather than through an agent.

The unit trust industry is vast, with many options open to the investor in the form of specialised and general investment. It is a simple and easy way to take advantage of rising stock market prices.

Competition between the main management group of unit trusts is fierce and their performance is closely monitored by the financial press. Every investor with cash to spare would be advised to put some money into unit trusts, taking care to choose the more successful groups.


CCMG - 2013


Next: