Unit investment trust
Also known as: UIT
A unit investment trust is a type of fund that buys and holds a fixed, unmanaged of or for a set period, then dissolves and distributes the proceeds back to investors once that term ends. Unlike a or , where a manager actively adjusts holdings over time or a periodically rebalances to track an index, a unit investment trust's is generally set at the outset and left alone for the life of the trust.
Investors buy units of the trust, which represent an undivided interest in the underlying , similar in spirit to shares of a , though a unit investment trust does not continuously issue new units the way an does. Because the is fixed and unmanaged, unit investment trusts typically carry lower ongoing costs than an actively managed , though they still charge a charge and other fees disclosed in the trust's .
Unit investment trusts have become less common since the rise of and , which offer similar lower cost, rules based exposure with the added flexibility of continuous trading and no fixed termination date. They still appear most often in specific niches, such as certain focused strategies where holding a fixed basket of to maturity has a genuine structural purpose, giving investors a known income stream and return of principal at a set date, similar to owning the underlying directly.