Unit trust

- Investors money is pooled with

Investment trust
- Investors investing in an

ETF
- Investors money is pooled

other investors. Unit trust is a kind

investment trust trade its shares

with money from other

of collective investment scheme.

on the stock exchange through a

investors and invested

broker.

according to ETFs stated

investment objective.

- Investment trust is a limited

- The pool of money is used to
finance a wide range of
investments such as shares,
bonds, property, commodity,

company which operates to

An ETFs objective is to produce

a return that follows closely a

generate income for its

specific index such as a stock or

shareholders through investing in

commodity index. ETFs may

the shares of other companies.

have complex structures. They

derivatives.

may be structured as cashbased ETFs or as synthetic

ETFs, which refers to the use of

- Investors invest in unit trusts by

derivatives.

- Investors invest in investment

Investors invest in ETF by

buying units in the fund. All units

trust by buying shares of the

of the same fund rank equally.

investment trust. Therefore, they,

buying units of the fund.

Investors earn income by capital

at the same time, become the

Any investors (small

gain and some unit trusts pay

shareholders with voting rights.

individual investors or large

dividends.

institutions) can equally get

access to ETFs. There is
capital gain when the price of
the units rises above the price

- It is an open-ended fund..
- Closed-ended fund .
- There is a fund manager who
takes care of investors money.

- There is no fund manager.

Investors buy and sell shares in

- The value of a unit = net asset

value = Total value of the funds/
number of units

paid for them. Some ETFs also

pay dividends.

- It is open-ended fund
- EFTs are managed

investment trusts on the stock

passively by EFT

exchange rather than dealing

managers. There are

with a fund management

management costs and

company.

other charges, however,

- Share price of an investment

they are very low.

trust can be higher or lower than

its NAV (net asset value). This

- EFTs are quoted in real

feature is factored by market

time. They are traded

demand. To be more detailed, if

throughout the day in line

share price is lower than NAV,

with the underlying index.

the shares are traded at a

discount. If share price is higher
than NAV, the shares are traded
at a premium.
- If new monies are received, new
units will be created. When
investors want to withdraw their
money from the fund, units will be
exchanged for cash value. If new
monies exceed redemptions,
managers will have additional
cash for further investments. If
new monies are less than
redemptions, managers may have
to sell some of the underlying
assets to afford the redemptions.

- Investment trust is a limited

company, so it is allowed to have
capital loan and other borrowing
forms. Capital in investment
trusts are fixed, so that they can
benefit from continuity. In fact,
capital is raised in the primary
market through IPO. Then shares
are traded publicly on the stock
exchange in secondary market.
Those transactions in secondary
market do not affect the
investment trusts capital, but
they impact the share prices

through market demand and

supply instead.