9 considerations
when comparing
Investment Trusts
and Unit Trusts
INVESTMENT TRUSTS
UNIT TRUSTS
Closed-ended: an
investment trust has a fixed
number of shares.
Open-ended: a unit trust
has a variable number
of units.
The fund manager may
borrow extra money to
invest, called gearing. This
can boost returns, but also
introduces extra risk into
the portfolio.
Unit trusts cannot borrow
capital to take advantage of
investment opportunities
and boost returns; however this
typically means that they are less
volatile than investment trusts.
Shares listed on the
London Stock Exchange
and can be bought and sold
through a stockbroker or via a
fund provider platform.
Units unlisted – can be bought
and sold through a fund provider
platform or directly through
the operator of the fund.
Investment trusts are
permitted to retain up to 15%
of the income received during
any financial year in a
revenue reserve.
Unit trusts must distribute all
of the income they receive.
Shares in an investment trust can
be bought and sold at a price
that is higher (premium) or lower
(discount) than net asset value
(NAV). This means the value of
shares is determined by supply
and demand in the stockmarket.
The price of a unit trust always
reflects the value of its
holdings, since it is based on
the net asset value (NAV) of the
underlying investments.
If demand for shares exceeds
supply, the share price rises.
If demand for units rises,
the unit trust manager
issues more units.
Performance is unaffected by
asset flows, allowing the fund
manager to make truly longterm investment decisions and
invest in less liquid assets such as
commercial property.
The manager has to buy
or sell assets as money flows
in and out of the fund.
Every investment trust has an
independent board of directors,
responsible for safeguarding
shareholder interests.
An Authorised Corporate
Director (ACD) is responsible for
operating the fund provider in
accordance with regulations.
Investment trusts have
ongoing charges and will
incur dealing fees when buying
the shares. They may also have
performance fees.
Unit trusts also have ongoing
charges and some have
performance fees. They may
also have initial charges,
although these may be waived if
investing through a platform.
Important information: Past performance is not a guide to future performance and may not be repeated. The value
of investments and the income from them may go down as well as up and investors may not get back the amount
originally invested.
This article is intended to be for information purposes only and it is not intended as promotional material in any
respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument.
The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment
recommendations Reliance should not be placed on the views and information in the document when taking individual
investment and/or strategic decisions.
Issued in May 2015 by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered no. 4191730
England. Authorised and regulated by the Financial Conduct Authority. UK09292