Several years ago I was
introduced to the idea of diversification and portfolio composition in investment.
During my search to find that single investment product that would satisfy both
objectives of a diversification and a solid portfolio composition of underlying
stocks, I came upon a collective investment scheme described as a unit trust. A unit trust is one form of a
collective investment scheme that pools the money of a group of persons and composes
a selected group of underlying investment assets beit, equities (stock), bonds,
or real estate assets and places these underlying assets into one basket of assets for
distribution to other investors in fractional portions. The total portfolio of
asset is divided into fractions called creation units and is priced subject to
the Net Asset Value (NAV) of the total sum of portfolio of assets divided by
the total number of creation units after liabilities.
Net Asset
Value
Number of units ─ Liabilities = Unit price
Unit trusts are similar in nature
to mutual funds with the slight differences being how they are organized as
collective investment schemes. On one hand, mutual funds are either closed end
or open end fund, and are distributed in accordance with the mutual fund
prospectus, but on the other hand, unit trusts are distributed as they are created and available
according to a trust deed. All collective investment schemes carry
redemption rights of the units issued. To exercise the right of redeeming the
units held, you may be required to pay a fee depending on the class of unit
trust you purchased.
A unit trust is introduced to
investors by way of an offering circular
while a mutual fund is introduced to investors by way of a prospectus. Both offering documents are similar to each other with
some common features such as the:
1.
Borrowing
privilege of the fund, (generally no more than ten percent (10%) of the trust/fund’s
value)
2.
Strategy
3.
Objective
4.
Fees
(Management, Distribution, Administrative, and other expense related fees to
operate the trust/fund)
5.
Matters
treating on taxes include other investor concerns.
6.
Investment
Manager
7.
Custodian/Trustee
You may want to have a look at
investing in a unit trust as an asset class that pools the fund from a group of
individual and invest those funds for the benefit of all.
FII
Feel
free to comment and ask questions.
Unit
Trust links:
Sagicor Sigma Funds
JMMB Income Growth Funds
http://ccfm.capital-credit.com/income-growth-fund
Scotia Premium Fixed Income
Scotia Premium Fixed Income
http://scotiainvestmentsjm.com/product_premium_fixed_income.php
Barita Unit Trust
Barita Unit Trust
http://www.barita.com/products-and-services/pooled-funds
NCB Capital Markets
NCB Capital Markets
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