14 APRIL 1961, Page 30

Unit Trusts


IN the last three years Unit Trusts have become an increasingly popular method of investment. In 1957 the total funds subscribed by British investors for investment in Unit Trusts was some £60 million. Today the figure is nearer £220 million. The total number of Unit Trust investors exceeds 600.000 with an average invest- ment of approximately £330.

Many of the people who have invested in Unit Trusts have chosen this medium for their first- ever investment. Unit Trusts are investment made easy. Minimum purchases are £10 and upwards; savings schemes accept amounts of 10s. and upwards. Thus investment in ordinary shares is facilitated for Mr. and Mrs. John Bull.

An increasing number of investors are look- ing to ordinary shares and Unit Trusts in the future to achieve these objectives: 1. To ensure that their savings do not depreciate as the value of money continues to fall.

2. To give them the opportunity for an increas- ing income and capital growth.

Besides being a convenient method of invest- ment, Unit Trusts are as safe a way of buying ordinary shares as exists. Hence it is not surpris- ing that they have caught the popular imagina- tion and the total funds have grown so substan- tially. It seems likely that they will continue to grow and in so doing will fulfil two important national objectives. Through them, part of the new capital required by British industry for research and development will be supplied. Through them, too, a contribution can be made to the supply of capital to the under-developed countries of the world. Last, but by no means least, they have the social advantage of providing a means for the establishment of the property- owning democracy.

Unit Trusts are simply co-operative ventures in investment. Basically they permit a group of investors to pool their resources and to have their accumulation of money invested in accordance with the terms of a Trust Deed in a portfolio of diversified securities selected by a Management Company. According to the size of his contribu- tion to the trust fund, each subscriber becomes the holder of a fractional interest in the securi- ties in which the monies of the trust fund are invested and also, after the deduction of manage- ment expenses, in the net income received from the investments.

Investment in a Unit Trust secures the follow- ing advantages for the investor: (i) The service of expert investment managers.

(ii) The protection afforded by (a) knowing that the securities in which the trust fund is invested are kept in the name and custodianship of a Trustee of first-class standing, and (b) the provisions of a Trust Deed approved by the Board of Trade and drawn up in accordance with its requirements.

(iii) A wide spread of investments in different industries and commercial undertakings, in individual companies within industries and often in companies overseas, thus minimis- ing investment risks.

(iv) One income distribution warrant to deal with each half-year as opposed to dividend warrants from a number of individual companies at various times of the year.

(v) Regular income distributions at half-yearly intervals.

(vi) Medium- and long-term opportunities for increasing income and for capital apprecia- tion by standing to benefit from the profit- ability of the industrial and commercial undertakings in which the trust fund is invested.

(vii) Facilities in most cases for regular saving and reinvestment of income. (viii) The avoidance of the need for constant attention to be given to investments occa- sioned by rights issues, bonuses and the like, as is the case of an owner of shares in many companies.

(ix) Visibility of the securities in which the trust fund is invested by means of a pub- lished portfolio circulated to unit holders twice yearly.

(x) Full marketability of investment and the assurance that the Managers will buy back without delay any units offered to them for repurchase.

A further interesting development appears to be imminent. To date the main bulk of Unit Trust investment had been made by individuals. This was similarly the case in the United States, where in 1939 the total investment in open-end Mutual Funds (the US equivalent of Unit Trusts) was almost exactly the same as the British figure.

As the investment advantages of Unit Trusts have become better appreciated in the United States, so they have attracted a wider class of the investing public. Today the total investment in Unit Trust in the US is reaching $20 billion.

At the recent annual meeting of the Associa- tion of Unit Trust Managers the chairman, Sir Oscar Hobson, said, 'Unit Trusts would seem to be ideal investments for trust funds, particularly perhaps where the funds are small or where the Trustees are not experts on investment matters.'

In the US such institutional investors as the trade unions, pension-fund managers, university and college foundations and the like, have in very many cases preferred to invest their money in Unit Trusts rather than to make up and super- vise their own investment portfolios.

This is logical and it may well be that Trustees and others in the United Kingdom will follow suit increasingly as time goes on. There are already indications that Unit Trusts are attracting institutional, as well as private, investors.