Series 7

Packaged Securities - Unit investment trusts (UITs)

Unit investment trust companies are a hybrid of open- and closed-end funds. Like mutual funds, UITs typically issue redeemable securities. However, like closed-end funds, UITs typically make a one-time public offering of a fixed number of shares which are known as units.
  • Many UIT sponsors maintain a secondary market that allows owners of UIT units to sell them back to the sponsors and other investors to buy UIT units from the sponsors.

  • A UIT will have a date when the UIT will terminate and dissolve; this date is established when the UIT is created.

  • However, there is no set lifespan that applies to all UITs, and some may take more than 50 years to terminate.

  • In the case of a UIT investing in bonds, for example, the termination date may be determined by the maturity date of the bond investments.

  • When a UIT terminates, any remaining investment portfolio securities are sold and the proceeds are paid to the investors.

  • A UIT does not actively trade its investment portfolio: rather, it buys a relatively fixed portfolio of securities and holds them with little or no change for the life of the UIT.

  • Because the investment portfolio of a UIT generally is fixed, investors know what they are investing in for the duration of their investment.

  • Investors will find the portfolio securities held by the UIT listed in the UIT's prospectus.

  • A UIT does not have a board of directors, corporate officers or an investment advisor to provide advice during the life of the trust.




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