What are Unit Trusts? Apart from equity or stocks, a popular form of investment is unit trusts. What are unit trusts? They can be defined as an investment that allows investors with similar objectives to pool their money together to be invested in a single portfolio of securities. The rationale for this is simple: as an individual, unless you are an accredited investor (or a high net-worth individual), you may not have sufficient capital or access to invest directly in the stock market. Furthermore, most investors may not be able to achieve proper portfolio diversification by investing individually. The securities in which unit trust funds invest include stocks, bonds and other financial securities. Professional and experienced fund managers are usually employed to manage unit trust portfolios, so you do not need to go out and hire your own manager, which may be a costly exercise. A unique feature of unit trusts is that investors who invest in them do not own the securities (or assets) directly, but instead have an indirect interest through their units of entitlement. In other words, they own units in the fund instead of the securities/ assets in the fund itself. Each unit of entitlement comes in the form of unit trust certificates. The returns for investors in unit trust funds are similar to those for stocks - namely from dividend income and capital gains, which come from the securities held in the portfolio. Each unit in the unit trusts is entitled to an equal amount of income derived from the securities held during a particular period of time. There are numerous types of unit trust funds in Malaysia - for example, equity growth funds, income funds, balanced funds, bond funds, money market funds and capital guaranteed funds, just to name a few. Since 2004, investors in Malaysia have also been able to access offshore funds; currently up to 50% of the net asset value of fund managers can be invested offshore in approved investments. This represents an important development in the industry as it allows Malaysian investors to further diversify their investment portfolios by accessing investments with different risk return profiles.
Posted on: Wed, 03 Jul 2013 01:47:16 +0000