Fundamentals of UT

What is UT

Fundamental Of
Unit Trusts


Unit Trust Funds are pooled investment vehicles where the funds collected (pooled) are utilized to purchase a pre-agreed type of financial security or securities. For example, an Equity Unit Trust Fund invests in listed stocks only.

A Group of people with a common objective get together and contribute to a pool of money

When People put in money, it is Referred to as investing in UNITS. For Example if a person puts in 1,000 rupees and the unit price that day is 20 rupees, that means he is entitled to 50 units.

Which is safely collected in a trust overlooked by a trustee

Trustee is responsible to exercise due diligence and vigilance over the fund with the objective of safeguarding the interests of the Unit holders.

The trust is managed by a professional fund manager backed by a competent research team.

The fund manager is the one who make all the decisions in relation to your investment and is a qualified investment professional who has experience in investing.

The investors benefit from a return

When the pool of funds appreciates in value so should your individual investments depending on the investment values. You will own a portion of this pool of money proportionate to your investment and when the pool of money enhances so will your investment.


Investors are then allocated Units worth a certain value in proportion to the amount they invested in the fund. The investors return is the growth or movement in Unit price value. The Unit Price value is based on the overall funds available and investment return generated at a given point in time (such as Interest income, Dividend and capital gains), net of fees (Management fees, Custodian fees, Trustee fees) and other applicable administrative fees.


Funds are managed by qualified fund managers who have expertise is specific asset classes. Often, the fund managers are backed by an independent Research team who carries out detailed Research and Analysis.


The trust is overlooked by a trustee, often a reputable bank. (The trustee of Guardian Acuity Unit Trust Funds is Deutsche Bank). Trustee is responsible to exercise due diligence and vigilance over the fund with the objective of safeguarding the interests of the Unit holders. In Sri Lanka, Unit Trust funds are licensed by the Securities and Exchange Commission (SEC) of Sri Lanka


Unit Trust Funds can be categorized based on a variety of factors such as (1) how the fund is structured (Open Ended vs. Closed ended Funds) (2) the type of asset class(es) the fund invests in (3) the style of investing (active vs. passive) (4) The investment Time Horizon etc.

Open Ended vs. Closed ended Funds

As the name implies, open ended Unit Trust Funds are 'open ended', where investors can enter and exit the fund at any time. Accordingly, there are no restriction on the number of units to be issued by the fund which means the fund does not have a maturity date. The entry or exist of investors does not have an impact on Unit Price value. All Guardian Acuity Unit Trust Funds are open ended. A closed ended Unit Trust Fund is often structured in the form of a publicly traded stock. The key difference between an Open ended and Closed ended Unit Trust Fund is that in the latter, Units have to be purchased/sold in the market at a market determined price. Thus, such type of funds always have a limited group of investors.

Type of asset class(es) the fund invests in

The type of asset class(es) a fund invests in depends on the investment objective of the fund. A unit Trust Fund can be invested in a single asset class or more than one asset class. For instance, a balanced fund invests in both fixed income and equity subject to a maximum and minimum mix of proportions.

The style of investing

The style of investing can be either active or passive. In a passively managed fund, the funds are invested in the same proportions as the constituents of a specific benchmark. The idea is that the fund mirrors the performance of the benchmark to the greatest extent as possible. Such funds are often defined as Indexed Unit Trust Funds.Whereas active management implies that professional fund manager actively tracking the performance of the investment portfolio and regularly making investment decisions on its underlined assets


Unit Trust Fund returns are variable and subject to change, as fund returns in turn are dependent on the returns generated by the specific instruments/securities the fund is invested in which may vary based on market conditions and other applicable risk factors such as default. Thus, Past Unit Trust Fund Returns are not a guarantee of their future performance.

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