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Section: 3 Types of Investment Companies
Sub Section: 3 Unmanaged Investment Companies
There is only one type of non-managed investment companies called Unit Investment Trusts.
Unit Investment Trusts
Unit Investment Trusts are pools of money invested in a portfolio that is fixed
for the life of the fund. To form a unit investment trust, a sponsor, typically
a brokerage firm, buys a portfolio of securities that are deposited into a trust.
It then sells to the public shares or 'units' in the trust called redeemable
trust certificates. All income and payments of principal from the portfolio
are paid out by the fund's trustees (a bank or trust company) to the shareholders.
Most unit trusts hold fixed-income securities and expire at their maturity,
which may be as short as few months if the trust invests in short-term securities
like money market instruments, or as long as many years if the trust holds long-term
assets like fixed-income securities.