Chapter 7: 2 Flashcards
What is a Unit Trust?
An open-ended CIS in the form of a trust. They may be authorised or unauthorised.
What is a Trustee
Appointed by a manager, trustee is a legal owner of assets in the trust, holding the assets for the benefit of the underlying unit holders.
Who is a unit holder?
Beneficial owners of the trust.
Why is a Unit Trust open-ended?
As it can grow as more investors buy into the fund.
How does a Unit Trust work?
Investors pay money into the trust in exchange for units. Money is invested in a diversified portfolio of assets. If the portfolio rises in value, the units increase in value, and vice versa.
What’s the role of a Unit Trust manager?
- Decides which investments are included in the unit trust to meet investment objectives. E.g. what to buy, when to buy it.
- Outsources decision-making to separate investment manager.
- Provides market for units, by dealing with investors who want to buy/sell units.
How does a manager carry out the ‘daily pricing of units’?
Based on the Net asset value (NAV) of the underlying constituents.
Who are trustees?
Organisations unit holders can trust with their assets.
How do trustees protect the interests of investors?
By monitoring the actions of the unit trust manager.
Who creates new units for the trust?
Trustees.
What are trustees subject to for Authorised Unit Trusts (AUTs)?
Trustees are companies subject to special regulation - all part of global banking groups.
