Unit Investment Trusts
Despite offering certain distinct advantages for an investor, unit investment trusts (UITs) are not nearly as familiar to most people as, say, mutual funds. According to data compiled by the Investment Company Institute (ICI), in 2016 mutual funds held nearly 192 times as much money as all UITs did. But as a greater diversity of UITs have been introduced, they have become more popular as an investment vehicle.
Historically, most unit investment trusts have invested in bonds, especially municipal bonds. However, in recent years, equity UITs have taken the lead.
What is a unit investment trust?
Like a mutual fund, a UIT represents a collection of individual securities. However, unlike a mutual fund, it has a specified termination date. A UIT can last as little as a year, or 30 years or more. A bond UIT's termination date coincides with the maturity dates of the bonds it holds; an equity UIT specifies its termination date. Once that date is reached, the proceeds are either distributed to investors or, in some cases, reinvested in another trust.