Unit Trust Funds

A Unit Trust Fund is a collective investment vehicle that allows investors to pool their resources with others to take advantage of professional investment management at a reasonable cost. The mutual fund and subsequently its management team will offer a set investment mandate and fund objectives - for example UK Equity Income, Fixed Interest or more a specialist approach like Russian Equities or Commodities.

The funds invested are generally spread across a wide number of different holdings, normally well over 75, and participating in a selection of well-managed funds can alleviate risk.

These funds are generally held as Unit Trust, Open Ended Investment Companies (OEIC) or Investment Company with Variable Capital (ICVC) structures. These different structures make little difference to the investor or performance of the fund. It would be fair to say that the difference in these structures should have little or no impact on your selection of the manager, management group or asset allocation.

From a taxation standpoint, holding Investment Funds directly can give cause to both an income tax liability on dividends or 'yields' and also a capital gains tax liability on realised gains. The former is generally unavoidable, but with careful planning capital gains can be reduced by making full use of capital gains tax allowances and spreading encashment over more than one year.

Many mutual funds can be held within Individual Savings Accounts (ISA) to reduce the amount of income tax payable and remove altogether the potential for capital gains tax.

The funds invested are expressed in 'units' that reflect the value of the underlying investments. The unit price is typically published daily.

It is important to bear in mind that the value of Unit Trust Funds can go down as well as up, and that past performance is not a guide to future returns

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