What is a Unit Trust

Investment funds provided by individuals are pooled and used to buy financial instruments. This portfolio of financial assets is divided into parts called units. Each unit represents a proportional investment in all the assets in the portfolio. Individuals own units in proportion to the amount of money they invest in the portfolio. The value of a unit fluctuates directly with the total value of the underlying assets. Investors are also entitled to their pro rata share of dividend or interest income generated by the unit trust's underlying securities.

Unit trusts could be suitable for anyone interested in potentially increasing their savings over the longer term and for those who are prepared to accept an element of risk. This could include people who have neither the time nor the experience to manage their own portfolios, small investors seeking diversification, and other investors who want to improve their long-term financial prospects

Unit trust prices are calculated on a daily basis on a net asset value basis, which is the total value of all assets in the portfolio including any income accrual and less any permissible deductions from the portfolio.

The same factors that determine the returns to a regular investment (shares, bonds etc) produce risks in investing in unit trusts. The value of a unit is directly dependent on the value of the securities in the portfolio; as markets move up and down, so will the value of your unit trust investment. Equity returns tend to be more variable than fixed interest fund returns, but over the long-run, they also tend to provide higher returns.

-Easy access to shares on the stock market. -Access to your money at any time -Your shares portfolio is managed at a low cost by a highly qualified team -You can calculate the value of your portfolio daily -Your investment has a history where inflation beats growth -Investment risk is reduced -Your investment is tax efficient

A unit trust has a trust framework where investments are held by an independent trustee. They are regulated by the Capital Markets Authority to ensure that they are safe and that only registered professionals are involved with the affairs of the unit trusts.

Investment minimums vary. Generally, for our products you can begin investing from Kes 100,000.

Yes. The minor is regarded as the legal owner and all documents are to be signed by a parent or legal guardian if the minor is younger than 18. The child will be entitled to the investment after attaining the age of 18.

Yes, normally twice a year, but in the case of some income funds, four times a year. The income comprises dividends on the shares in the portfolio and interest on the fixed investment securities.

• Returns from the financial markets;
• The type of assets within the unit trust portfolio;
• The management skills of the portfolio managers.

The value of shares, bonds and other asset classes are determined by financial markets and can rise or fall over time. In general, equity-based unit trusts provide the highest potential return, followed by bond or income funds and finally money market funds. The level of investment return is related to the level of risk incurred.

Investors can gain access to a wider range of shares. Unit trusts typically consist of of a wide selection of stocks.

As unit trusts invest in a number of different companies, the risks associated with investing in individual stocks and shares are reduced. Also, the more companies the unit trust invests in, the less each company's individual performance affects the unit trust. Unit Trusts are also managed by a professional fund manager who decides which stocks to choose for the portfolio and when to buy and sell.

Unit trusts should be considered as medium to long-term investments and at least three to five years is recommended. However, there is no minimum period that you must hold your investment and your units will be sold at no charge when you wish to do so.

• your risk profile;
• your time horizon for the investment;
• whether you require regular income from the investment or are purely looking for capital growth.

Unit trusts are considered appropriate investment vehicles for individual investors wanting to gain long-term exposure to financial markets. However, the value of a unit trust depends on the value of the underlying assets within the portfolio. Therefore, the value of the unit trust will fluctuate as the values of the underlying assets fluctuate. When is the best time to invest in unit trusts? You can invest at any time. Since it is difficult to predict market conditions,, we will provide you with the expert investment strategy of a fund manager who is more in-tune with market fluctuations.

One of the most common mistakes made by investors is to buy in and out of unit trusts based on short-term performance figures. Periodic buying and selling between funds can lead to increase in the cost of transactions, which can reduce the return on your investment. It is important to note that portfolio managers do not manage funds on a short-term basis. Most portfolios, particularly equity funds, are managed to generate consistently good returns over a period of five years and above. A good strategy is to buy unit trusts on a regular basis - termed shilling cost averaging. This method allows you to avoid the risk of poor timing, which may result in buying when the market is high and selling when the market is low.

Potentially superior returns to fixed deposits over the longer term, providing investors with the opportunity to build real wealth.

Easy and affordable investment: They enable investors to invest in a wide variety of shares, bonds and other financial instruments that would be more expensive if bought individually.

Diversification of risks: With a relatively small investment you are less dependant on the performance of one company. Expertise in Professional Management: Unit trusts are managed by highly qualified investment managers and investment specialists.

Value for money: The pooling of money increases the buying power by enabling the payment of lower dealing and administration costs than if the investor had invested directly in a selection of investments. The pooling of investments also enables the fund manager to buy shares, money market instruments such as treasury bills, bonds and other investments, which would be beyond the reach of the average investors.

Liquidity: unit trusts are flexible and easily accessible; you can sell all or part of your investment at any time.

Tax efficient: Unit Trust funds do not pay taxes on income or on capital gains.

Safe and Transparent: Unit trusts are strictly controlled the Capital Markets Authority under the Capital Markets (Collective Investment Schemes) Regulations, 2001. The regulations impose duties and responsibilities on the key functionaries of the fund including a fund manager, custodian and trustee.

The fees and charges are transparent and are published in the Information Memorandum. Information on the investment performance is provided in a report audited by external auditors. Unit trusts are also required to have a Trust Deed, the legal document establishing the trust, along with an Information Memorandum.

Yes, as most Unit Trusts offer a reinvestment plan. These plans allow you to increase the number of units you hold, enabling you to reinvest in additional units with no sales charge.

You may sell all, or a portion of your units on any working day. You will receive the then-current net asset value of the units based on the current market value of the underlying securities in the portfolio, less any deferred sales charge, as of the evaluation time. As the market fluctuates so will the value of your units. Therefore, your units may be worth more or less than what you originally paid.

Unit trusts may be an attractive investment vehicle for retirement plans. They offer a variety of investment opportunities ranging from relatively conservative to more aggressive investments in both domestic and international markets.