Unit Investment Trust
A registered investment vehicle with a fixed portfolio of securities and a defined termination date.
What is UIT?
A unit investment trust (UIT) is a registered investment company that purchases a fixed portfolio of securities and sells redeemable units to investors. Unlike mutual funds, UITs are not actively managed — the portfolio is fixed at inception and is not traded. UITs have a defined termination date, typically 1–5 years for bond UITs and 15–24 months for equity UITs, at which point the portfolio is liquidated and proceeds are distributed to unit holders. UITs were among the earliest forms of pooled investment vehicles and are best suited to investors who want a specific, pre-determined portfolio without ongoing trading. The first ETFs were structured as UITs (the original SPDR S&P 500, SPY, remains a UIT).
Example
An investor purchases units of a bond UIT holding 30 investment-grade corporate bonds at $1,000 par value each. The UIT pays monthly income derived from the bond coupons and will terminate in 5 years, returning par value to unit holders. No bonds are added or removed during the term. This differs from a bond mutual fund, which is actively managed and has no termination date.
Source: SEC — Unit Investment Trusts