What is an 'Estimated Current Return '

Estimated current return is the return that an investor can expect for a unit investment trust over a short period of time, for instance annually. It is actually an estimate of the interest that the unit holder can expect to receive. The return can be found by taking the estimated annual interest income from the securities of the portfolio and dividing by the maximum public offering price, net of the maximum sales charge for the trust. 

BREAKING DOWN 'Estimated Current Return '

The estimated current return is not as exact as the estimated long-term return. Also, typically the estimate is more susceptible to interest rate risk during the life of the portfolio. Fund managers reporting estimated long-term return will be able to arrive at the estimate because the underlying fund investments have a specified return that is given at the time of initial investment. Notably, interest rate risk is most relevant to fixed-income securities; a possible rise in market interest rates presents a risk to the value of fixed-income securities. 

By definition, the estimated long-term return is a hypothetical measure that gives investors an expectation for the return over the life of an investment. The estimated long-term return can be a helpful consideration when determining whether to invest in a fixed-income product

It is most often quoted in investments with fixed-income securities and a fixed duration. For example, a unit investment trust (UIT) is an investment company that offers a fixed portfolio of stocks and bonds as redeemable units to investors for a specific period of time. It is designed to provide capital appreciation, and in some cases, dividend income. 

Unit investment trusts, along with mutual funds and closed-end funds, are defined as investment companies. When looking to invest in this type of trust, an investor should be shown the estimated long-term return as well as estimated current return. The measure is comparable to a savings account rate or the rate of interest quoted for a certificate of deposit. 

Estimated Current Return and Transparency

Unit investment trusts, and specifically UIT portfolios with a high allocation to fixed-income investments, can be a good way for investors to access an investment vehicle that can provide some measures of transparency for long-term returns. These investments are one of three formal investment companies regulated by legislation from the Investment Company Act of 1940, which requires investment company registration and regulates the product offerings issued by investment companies in the market. Unit investment trusts are created by a trust structure and issued with a fixed maturity date

RELATED TERMS
  1. Unit Investment Trust (UIT)

    Unit investment trusts (UIT) buy a fixed portfolio of securities ...
  2. Widely Held Fixed Investment Trust ...

    A widely held fixed investment trust (WHFIT) is a unit investment ...
  3. Investment Company

    An investment company is a corporation or trust engaged in the ...
  4. Unit Trust - UT

    A unit trust is an unincorporated mutual fund structure that ...
  5. Total Return

    Total return is a performance measure that reflects the actual ...
  6. Fixed Income

    Fixed income is a type of investment in which real return rates ...
Related Articles
  1. Financial Advisor

    Understanding How Top Trust Companies Operate

    Trust companies perform a wide range of services related to investment and asset management. Learn why to use a trust company and what they can do for you.
  2. Investing

    Investing in a Unit Investment Trust

    Unit trusts offer professional portfolio selection and a definitive investment objective.
  3. Investing

    Fixed-income trader: job description and salary

    Understand what kind of skills, necessary licenses, and daily activities are needed as the requirements and find out what the average salary of a fixed income trader.
  4. Investing

    Investing In Oil And Gas UITs

    Unit investment trusts provide direct exposure to the energy sector, fueling better returns.
  5. Retirement

    How To Set Up A Trust Fund In The U.K.

    A guide to the whys and wherefores of setting up this most versatile of estate-planning instruments in the United Kingdom.
  6. Investing

    How to Create a Modern Fixed-Income Portfolio

    Exposure to different asset classes is required to generate income, reduce risk and beat inflation. Find out how bonds can help.
  7. Managing Wealth

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
  8. Investing

    Top 3 European Investment Trusts (JEO.L, HEFT.L)

    Discover three of the best-performing European investment trusts for investors to consider as vehicles to obtain exposure to the European economy.
  9. Financial Advisor

    How Trust Funds Can Safeguard Your Children

    Certain types of trust funds can help to protect your assets from bankruptcies and civil actions, and can be established to safeguard your children and designated beneficiaries.
Trading Center