Unit Trusts *
A Unit Trust is a form of express trust, where the underlying asset interest is unitized per the terms of the trust deed. Units are issued to investors and provide a proprietary interest in all the underlying trust investments. Unit ownership entitles investors to a right to redeem its share of the pool of assets, in exchange for cash based on the net asset value of the trust assets.
Under a textbook definition, a unit trust is simply a collective investment scheme, pooling funds from many investors, in a liquid structure. The aggregated funds are professionally managed in a well-diversified portfolio. In short, a mutual fund.
In practice, Unit Trusts tend to be a collective of one, or very few investors. With less unit holders, there is less liquidity. Additionally, unit trusts may be less diversified and more focussed in the investment strategy.
Stand-Alone or Umbrella
Unit Trusts are either “stand-alone” or “umbrella” trusts. A standalone involves a single trust and is used where a single investment strategy is employed. Umbrellas trusts are when there are multiple investment strategies, and each individual strategy is allocated to a separate “sub-trust”.
Cayman Islands Unit Trusts have become an increasingly popular vehicle for structuring hedge funds. Particularly for Japanese based structures, and Asian-Australian markets overall.
Structures
Typically, Unit Trusts are managed through a single investment company, whose management shares are held in a purpose trust. In the Cayman Islands, that would be either a Charitable or STAR Trust.
Units are issued to investors from the underlying company and the structure operates much like a tradition investment fund.
FundBank can assist in providing all corporate needs, and ongoing governance, in Unit Trust structures.
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