Unit Trust

A Unit Trust Fund pools money from investors and invests it in a portfolio of assets according to the fund’s stated investment objective and investment approach. A unit trust is a fund which adopts a trust structure. The pool is managed by a team of full time professionals and a trustee is appointed to protect the interests of the unit holders.

Benefits Of Unit Trust Investments

• Professional management – Unit trusts are managed by professional fund managers with expertise and experience in investments.

• Diversification – Unit trusts, especially balanced funds, invest in a variety of asset categories enabling you to better spread your risks. This means that poor performance of any one asset in the unit trust is not likely to have a major adverse impact on your investment as a whole.

But this may not apply if you are investing in Unit Trusts which invest in highly specialized asset classes. For instance, real estate funds may invest only in real-estate specific asset categories. So, if the real estate market is going through a downturn, the value of your investments in real estate funds may also go down.

Drawbacks Of Unit Trust Investments

• Open to market risks – However astute the fund manager, unit trust funds are not immune to market risks. Depending upon market risk factors you may lose a significant portion or even the entire corpus of your investment.

• Fees and charges – There are fees/charges payable by you, including subscription fee or initial sales charge, redemption fee or realization charge and switching fees payable when you switch from one fund to another managed by the same fund manager.

And, then there are fees payable by the fund including management fees, trustee fees and miscellaneous charges like administration and audit fees. These fees can impact the way you invest in, manage in and exit funds.

Questions You Should Ask Before Investing in Unit Trusts

Investment objective and strategy – Every fund has explicitly stated investment objectives and may adopt certain strategies to maximize returns. Check if these fit in with your objectives.

• Risk profile – Take the time to understand whether the funds you’ve shortlisted actually fit in with your risk profile before you invest in them.

• Time Horizon – Check whether the funds you’ve shortlisted fit in with your time horizon goals. You may be saving up to buy a gadget; in such a case a short-term debt fund may be a good choice. If you are looking to build a corpus for your toddler’s college education, you should consider investing in long-term funds.

• Fees, charges and commission – Check the fees and charges that will ultimately be borne by you and the the commissions your financial adviser will gain if you invest in the funds recommended by him.

• Fine print – Always pay attention to the fine print; this includes warnings, exclusions and disclaimers.

Additional Useful Details About Unit Trust Investments

Approved Unit Trusts

The list of unit trusts approved for sale to the public is available on the Monetary Authority of Singapore (MAS) website. You can access the information via OPERA, the electronic repository for public offers of investments. Please remember that MAS approval does not guarantee the quality or profitability of the fund. You must do your own due diligence before investing in a particular unit trust(s).

Overseas Unit Trust Investments

MAS allows unit trusts set up overseas to be offered in Singapore. Foreign unit trusts approved for offer by MAS are known as “recognized funds”. You can visit OPERA on the MAS website to check whether a foreign fund is recognized for offer to retail investors in Singapore.

Unit Trust Distributors

Distributors of unit trusts would need to hold a financial adviser’s license or be an exempt financial adviser. The list of financial advisers regulated by MAS is available on the MAS website under “Financial Institutions Directory”.