Equity Unit Investment Trust

An equity unit investment trust is a publicly offered, pooled trust fund managed by an investment company.

Equity unit investment trusts are managed by investment companies and can be offered alongside open-end mutual funds, closed-end mutual funds and exchange-traded funds (ETFs). Unit investment trusts are pooled fund offerings that can be managed to various objectives similar to open-end and closed-end funds as well as ETFs. They can include equities, bonds, commodities and cash equivalents. Equity unit investment trusts will focus their portfolios on stock investments.

While equity unit investment trusts can be managed to similar strategies as other common funds in the market, their structures are significantly different. Their management is regulated by the Investment Company Act of 1940. Equity securities in a unit investment trust are bought and held for the life of the trust. At that point they can either be liquidated at market value or rolled over into a newer, current version of the trust.

Equity unit investment trusts have many unique differences when compared to mutual funds. Equity unit investments trusts will issue a specified number of shares during a scheduled offering period. The products have a definitive duration. Thus, investors who buy the product will receive a distribution at the product’s net asset value on the termination date. The product is liquidated at its net asset value. Often unit holders will receive special options to reinvest their capital in the product’s next iteration, which typically is issued immediately following a termination date.

Equity unit investment trusts are bought and sold from the issuing investment company. They may also be available through some brokerage platforms. Equity unit investment trusts are diversified portfolios and they can distribute dividends and capital gains.

There are various types of equity unit investment trust products available, allowing investors to choose an investment that closely matches their own risk tolerance and investment goals. (See also: Investing in a Unit Investment Trust.)

Invesco is one investment company offering a broad array of equity unit investment trusts. One example is the Large Cap Value Strategy which invests in 20 stocks from the S&P 500 Value Index. Its deposit date was January 11, 2018. It had a scheduled primary offering period of January 11, 2018 to April 6, 2018. The unit investment trust has a 15-month term with a termination date of April 18, 2019.