What is Unit Trust?

Full Definition

A unit trust is a collective investment scheme in which money from many investors is pooled and managed by a professional fund manager. The fund is legally structured as a trust, with a trustee holding the assets for investors' benefit. You buy units at the offer price and sell at the bid price, and the unit value reflects the net asset value of the underlying holdings, such as UK and global shares or bonds. Unit trusts let smaller investors gain diversification and professional management that would be hard to achieve alone. Charges typically include an ongoing annual fee that erodes returns over time. Returns can come as income distributions or capital growth, both of which may be taxable outside a tax wrapper; holding the fund inside a Stocks and Shares ISA shelters it, with the 2026/27 ISA allowance at GBP 20,000. Open-ended investment companies (OEICs) are a similar, company-structured alternative now more common than trusts.

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