The different types of unit trusts

When you are deciding on what to invest in it’s always important to consider your own unique investing needs. That’s why you’ll find there’s often not just one type of investment in a particular category of investment products. Managed portfolios (bundles), Exchange Traded Funds (ETFs) and even unit trusts are categorized to suit different investor needs.

The kind of unit trusts available to invest in, differ depending on the account you are investing them in. For example, unit trusts in a Retirement Annuity (RA) account will need to follow the relevant regulations. As an example, Regulation 28 of the Pension Funds Act limits the equity exposure (local and foreign) of retirement annuities to a maximum of 75% of the total investment value.

Similarly, Regulation 28 also limits the offshore exposure of RAs to a maximum of 45% of the total investment value. This means that RAs cannot have more than 75% of their assets invested in equities or more than 45% of their assets invested offshore. Unit trusts that are available in a RA have to follow the same guidelines.

Each unit trust has its own unique strategy and composition and is categorized into different strategy themes.

Some of these include:

Balanced Funds

A balanced fund unit trust is a type of investment fund that combines both stocks (equities) and bonds (fixed income securities) in its portfolio. The goal of a balanced fund is to provide investors with a diversified investment option that offers potential for growth through equity investments while also providing stability and income through bond investments.

Money Market Funds

The goal of a money market unit trust is to provide investors with a relatively safe place to park their cash while earning a modest return that typically exceeds traditional savings accounts.

Income Funds

An income unit trust primarily focuses on generating regular income for investors. These funds typically invest in a diversified portfolio of income-generating assets such as bonds, dividend-paying stocks, preferred stocks, real estate investment trusts (REITs), and other securities.

Stable Funds

A stable fund unit trust is an investment fund designed to provide stability and capital preservation while aiming to generate modest returns over the long term. These funds typically invest in a mix of low-risk assets such as government bonds, high-quality corporate bonds, cash equivalents, and other low-volatility securities.

Capital Funds

A capital unit trust, also known as a growth fund or a capital appreciation fund, is an investment fund that primarily focuses on growing investors' capital over the long term. These funds typically invest in assets such as stocks, real estate, and other growth-oriented securities with the aim of generating capital gains rather than regular income.

Inflation Funds

An inflation unit trust is an investment fund designed to protect investors' capital from the effects of inflation while aiming to generate returns that outpace the rate of inflation over the long term. These funds typically invest in assets that have historically demonstrated an ability to preserve purchasing power in inflationary environments, such as inflation-linked bonds, real estate investment trusts (REITs), commodities, and other inflation-hedging securities.

Property Funds

A property unit trust is an investment vehicle that allows investors to invest in a portfolio of real estate assets. These trusts typically invest in a diversified range of properties, which may include commercial buildings, residential complexes, industrial properties, retail spaces, and other real estate assets.

Equity Funds

An equity fund unit trust is a type of investment fund that primarily invests in equities. Equity funds invest in a diversified portfolio of stocks, providing investors with exposure to a broad range of companies and sectors.

Feeder Funds

A feeder fund unit trust is a type of investment fund that invests primarily in another investment fund, typically a master fund. Instead of directly investing in stocks, bonds, or other securities, a feeder fund invests its assets in a master fund, which then manages the underlying investments.

Feeder funds are often used in international investing, where regulatory or tax considerations make it advantageous to invest through a local fund rather than directly in foreign securities.

Which fund?

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