Unit Trusts

IN ADDITION TO mutual funds, closed-end funds and ETFs, you might hear about a fourth type of fund: unit investment trusts, or UITs. These are unmanaged baskets of securities sold by brokers during a onetime public offering period, with investors paying perhaps a 4% sales commission. Each UIT has a maturity date, though some sponsors of UITs will redeem the funds from investors before maturity.

Are UITs a good investment? Investors don’t appear wildly excited about them. According to the Investment Company Institute, there were 4,300 UITs outstanding as of year-end 2020, with combined assets of $78 billion, barely above the $74 billion recorded two decades earlier. UITs that hold stocks accounted for $70 billion of the total. By contrast, regular mutual funds managed $24 trillion as of year-end 2020, up from $7 trillion in 1999.

Next: Covered Calls

Previous: Closed-End Funds

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