Unit Investment Trusts (UITs)

What Are Unit Investment Trusts?

A unit investment trust, commonly referred to as a UIT, is an investment entity that issues securities representing undivided interests in a fixed portfolio of securities. UITs are typically gathered by a sponsor into a portfolio, placed into a trust, and sold in a public offering. They are redeemable securities issued for a specified term, and investors are entitled to receive a proportionate share of the UIT’s net assets on redemption or at termination.

A unit investment trust is typically offered in a one-time public offering of a set number of units. Despite that, UIT sponsors often establish secondary markets, allowing owners of individual UIT units to sell those units back to their sponsors, thus extending the opportunity for new investors to buy UITs.

The termination date of a UIT is established when the UIT is created; note that this date may be many decades after the date of creation. In the instance of, say, a portfolio of bonds, the UIT’s termination date would likely correlate to the bonds’ maturation date. When a UIT reaches its termination date, the remaining securities are sold, with the proceeds going to the investors.

Unit investment trusts do not actively trade their investment portfolios. The securities purchased by a UIT are maintained during the trust’s lifespan, so investors considering a UIT will have fairly confident knowledge what the investment entails.

Costs and Fees

The expenses associated with unit investment trusts involve sales charges; creation and development fees; and operating expenses, typically charged against the UIT’s portfolio of assets. Sponsors generally offer several possible discounts, including breakpoints, which let investors reduce fees by increasing the size of their investments, as well as discounts on rollovers and exchanges.

Risks

It’s important for investors to note that no unit investment trust comes with the guarantee that it will reach its objective. All UIT investments are subject to market risks associated with any investment — that is, the possibility that the securities included in the portfolio will decline. Additionally, UITs are not managed — their the securities in each portfolio are not meant to change — a fact underscoring the risk of decline. There are also tax consequences associated with transferring funds from one UIT to another UIT.

If you have lost money investing in unit investment trusts (UITS), call the securities and investment fraud law firm Fitapelli Kurta at 877-238-4175 without delay. You may be entitled to recover your losses. We accept all cases on contingency: Fitapelli Kurta only gets paid if and when you collect money. Time to file your claim may be limited, so we recommend you avoid delay. Call 877-238-4175 now to speak to an attorney for free.