What Is an Equity Unit Investment Trust (EUIT)?
An equity unit investment trust (EUIT) is a closed-end, publicly offered pooled trust fund managed by an investment company. In particular, an EUIT will only invest in the stocks of publicly traded corporations.
- An equity unit investment trust (EUIT) is a type of closed-end investment fund that invests in the stocks of public companies.
- While it invests pooled money, like an equity ETF, an EUIT differs in that the fund is closed-ended, meaning that the EUIT stops taking new money after a certain date.
- Closed-end funds often offer higher returns or better income streams than their open-end fund counterparts.
Understanding Equity Unit Investment Trusts
A unit investment trust (UIT) is a U.S. investment company that buys and holds a portfolio of stocks, bonds or other securities. UITs share some similarities with two other types of investment companies: open-ended mutual funds and closed-end funds. All are collective investments in which a large pool of investors combine their assets and entrust them to a professional portfolio manager. Units in the trust are sold to investors, or "unitholders."
Equity unit investment trusts are managed by investment companies and can be offered alongside open-end mutual funds, closed-end mutual funds and exchange-traded funds (ETFs). Equity unit investment trusts will focus their portfolios on stock investments. While an ETF is an open-ended investment, an EUIT is a closed-ended investment.
EUIT vs. Equity Funds
While equity unit investment trusts can be managed to similar strategies as other common funds in the market, their structures are significantly different. Their management is regulated by the Investment Company Act of 1940. Equity securities in a unit investment trust are bought and held for the life of the trust. At that point they can either be liquidated at market value or rolled over into a newer, current version of the trust.
Equity unit investment trusts have many unique differences when compared to mutual funds. Equity unit investments trusts will issue a specified number of shares during a scheduled offering period. The products have a definitive duration. Thus, investors who buy the product will receive a distribution at the product’s net asset value on the termination date. The product is liquidated at its net asset value. Often unit holders will receive special options to reinvest their capital in the product’s next iteration, which typically is issued immediately following a termination date.
Investing in Equity Unit Investment Trusts
Equity unit investment trusts are bought and sold from the issuing investment company. They may also be available through some brokerage platforms. Equity unit investment trusts are diversified portfolios and they can distribute dividends and capital gains.
There are various types of equity unit investment trust products available, allowing investors to choose an investment that closely matches their own risk tolerance and investment goals. (See also: Investing in a Unit Investment Trust.)
Invesco is one investment company offering a broad array of equity unit investment trusts. One example was the Large Cap Value Strategy which invested in 20 stocks from the S&P 500 Value Index. Its deposit date was January 11, 2018. It had a scheduled primary offering period of January 11, 2018 through April 6, 2018. The unit investment trust then had a 15-month term with a termination date on April 18, 2019.