Unit trusts are open ended investment vehicles set up to make money on behalf of investors.

The term open ended refers to the fact that they can grow and contract as demand for units either expands, or contracts. So for example if a client wants to buy units in a fund, the fund can create additional ones for the investor. This means unit trusts can grow very big. Units share some characteristics with shares – they may offer income and/or capital appreciation for example – however, unlike shares, they cannot be traded between investors via an exchange. The “trust” element comes from the fact that when a fund manager takes money from investors and invests it, the assets of the fund are safeguarded by a separate trustee.

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