Unit Trusts

Unit trust is a product that allows investors with similar investment objectives to pool their funds to be managed by professional fund managers through investing these funds in a wide range of securities (e.g. stocks and fixed income instruments).

Mechanics

The type of securities within each unit trust fund’s portfolio is dependent on the fund’s objective and investment strategy. For example, a bond fund gives its investors the opportunity to invest in the bond market to potentially earn a steady income stream. An investor in a unit trust fund is often referred as a unit holder as ownership of the fund is divided into units of entitlement. A unit holder has easy access to the performance of the fund’s investments through unit prices that are calculated and published daily in major newspapers. A unit holder would also receive a detailed report of the fund’s portfolio of investments on a periodic basis (i.e. every six or twelve months).

To safeguard the investments, a trustee is appointed for the fund. The trustee is responsible to take custody and control the fund’s assets and to ensure the fund manager adheres to the requirements/guidelines detailed in the fund’s deed.

The Regulator

In Malaysia, the Securities Commission (SC) is responsible for regulating the unit trust industry. The Securities Commission Act was established to provide a regulatory environment that would protect the interests of investors and facilitate an orderly development of the unit trust industry.

Benefits and Risks of Investing in Unit Trusts

• Diversification of risk through an investment portfolio
• Professional fund management
• Easy access to liquidity
• Convenience
• Affordable investment amounts