Does a unit investment trust charge a fee? (2024)

Does a unit investment trust charge a fee?

All UITs have fees and expenses. These costs, like all investing costs, are important to understand because they affect the return on your investment. UIT fees and expenses can be divided into those fees that relate to distribution of the UIT and those that relate to operation of the UIT.

What are the charges for a unit trust?

Fees charged to the fund

Payable to the fund manager for managing the fund. Actively managed funds charge management fees ranging from 1.0% - 2.0% per annum of the fund's NAV, while passively managed funds generally charge management fees below 1%.

Do unit investment trusts have management fees?

Like other forms of investing, UITs carry with them a variety of costs. Some UITs charge a sales charge called a load. This sales charge is typically a percentage of the investment amount and can range from 1% to 5% or more. UITs typically charge a management fee which is a percentage of the assets held in the trust.

What is the trustee fee for a unit trust?

The trustee fee is charged by the trustee for providing custodian services for safekeeping the fund's assets. The management fee usually ranges from 0.5% to 2% and the trustee fee usually ranges from 0.1% to 0.15%.

Do investment trusts have fees?

Investment trusts

In order to buy investment trust shares, you will normally have to pay dealing fees plus government stamp duty of 0.5%. Dealing fees are sometimes waived if you buy direct from the trust's management company through its in-house investment scheme.

What are the disadvantages of unit trust?

What are the cons of unit investment trusts?

However, the fixed nature of UITs can be a drawback, especially for investors who might prefer a more active approach. Also, as with all types of investments, UITs do carry risk, including market risk, interest rate risk and credit risk.

Does a UIT charge a management fee?

UITs also charge creation and development fees, which compensate the sponsors for creating and developing the trusts. However, UITs generally do not deduct a separate management fee because the portfolio is not actively managed.

Do UIT have management fees?

Since UITs offer a fixed portfolio, there are no investment management fees and, because the buying and selling of portfolio securities is limited, transaction costs are minimal. Further, there are no ongoing marketing fees charged to the trust, as most UITs do not continually market their units to the public.

Why buy a unit investment trust?

UITs are professionally selected fixed portfolios that allow investors to know what securities are held within the portfolio. In contrast to actively-managed funds which continually buy and sell securities, thereby changing their investment mix, the securities held in a UIT generally remain fixed.

How do unit trusts pay out?

In a unit trust, each unit holder has a defined interest in the trust assets and income. The trustee distributes the income pre-tax to the unit holders based on the number of units they hold. In a discretionary trust, the trustee has discretion over how income and capital gains are distributed to beneficiaries.

Is a unit trust tax free?

Tax-free Unit Trusts

By law you can save R36 000 every year or R500 000 over a lifetime in a tax-free vehicle such as a unit trust. All interest, capital gains and dividends you earn will be completely tax-free (only applicable to SA tax residents).

What is the difference between a trustee and a unit trust?

The trustee is normally a shelf company, set up specifically to act for the unit trust. Unitholders appoint the trustee, and their powers are contained within the trust deed. The trustee legally owns the trust and may be held personally liable for any debts incurred whilst as the trustee.

How do investment trusts take their fees?

Generally, the fees are taken from any income generated, but if there is not enough income to cover ongoing charges then the fund manager will take its fees out of a fund's capital. ETFs have a similar process and make adjustments to the net asset value of a fund on a daily basis to account for fees.

How can I avoid investment fees?

How do investment trusts take charges?

Most investment trusts quote an 'ongoing charge' which is the estimated annual charge of holding the investment trust. This includes the annual fee paid to the fund manager for managing the portfolio, plus regular recurring costs such as directors' fees and audit fees.

Is it wise to invest in unit trust?

Depending on the asset allocation, a unit trust investment has the potential for higher returns over the long term compared to more fixed-income options, such as fixed deposits or money market accounts. However, it is also exposed to market fluctuations, and your investment value can go up or down on any given day.

Is my money safe in a unit trust?

Funds are not principal or capital-guaranteed.

You may lose a substantial amount of the money you invested in certain situations. The risks of investing in the fund are described in the product offering documents such as the prospectus and the product highlights sheet.

Why set up a unit trust?

The main advantage of the unit trust over other types of trusts is that the parties involved are issued with units which (like shares): Define that party's interest in the assets and income of the trust; Can be easily transferred; and.

What happens when a unit investment trust matures?

Investors may do nothing and allow the portfolio units to mature. The trust will liquidate and they will receive a cash distribution of the trust's proceeds, if any.

Can you sell a unit investment trust?

While UITs are designed to be bought and held until they reach termination, investors can sell their holdings back to the issuing investment company at any time. 4 These early redemptions will be paid based on the current underlying value of the holdings.

How long should you invest in unit trust?

Up to around 3 years. Balanced – these funds are great for retirement funds or for an investor looking for moderate risk in their portfolio with diversification between all asset classes. (Cash, property, bonds, shares, offshore). Ideal time frame is 3 – 5 years to remain invested.

What are the risks of UIT?

Equity UITs: have risks common to owning individual stocks, which may include but are not limited to perceptions of the financial stability of the issuers, the condition of the stock market and/or sector, political and economic events, and rising interest rates.

Why do I pay management fees?

Like any other service fee, management fees are paid to investment professionals in return for their services. The services can be in the form of advice, expertise, and, hopefully, a high return on your investment.

Do unit trusts pay dividends?

A unit trust fund can earn income from the underlying assets that it holds. This income is referred to as “distributable income” (since it is distributed to unitholders). It consists of interest and/or REIT income and/or dividends, depending on the underlying holdings.