What is a unit trust?
Is Unhedged a unit trust?
How often do you unitise?
Market has moved, but my holdings didn't?
A unit trust is a legal structure that our legal buffs define as:
A fund structure established under a trust deed in which one or more beneficiaries hold 'defined entitlements' to the trust's capital and income. These fixed defined entitlements are referred to as 'units', and the beneficiaries holding the units are referred to as 'Unit Holders.'
Right... what does that mean? It basically means that when you invest in a Unit Trust like our Unhedged Fund, you buy units in the Fund. New units are created to represent your investment. The money you invest will, in the end, be managed by a fund manager (in our case the human is replaced by Mr Algorithm). When the fund manager (Mr Algorithm) makes a profit, the unit price will go up, and when the fund manager makes a loss, the unit price will go down. "Simples!"
Market movements vs Unit price
When you see the stock market going up and down on Bloomberg, that will not be reflected in the unit price on a minute to minute basis. Once per business day, we take a snapshot and determine the fund's value and, therefore, the value of the fund's units. As Unhedged trades in the US markets we trade in US dollars, and therefore, even when the market doesn't move at all, our holdings could move in Australian Dollar terms because of the unrelated foreign exchange movements between US and Australian dollars. It also means there is a delay to account for the different time zones.
Unitisation occurs when an investor enters or leaves the fund. The Trustee creates new units to represent the investment or take units away to pay out the withdrawal. Consequently, we will have to sell underlying stocks as well, and we try to do this as intelligently as possible so we do not create a cost when we do not need to.
Links to related articles:
Impact of buy/sell spread
Change my allocation
Products issued by Melbourne Securities Corporation (MSC). Please consider the PDS and TMD available on our website before applying. All investments carry risks and you may lose your money. Past performance is not indicative of future performance. The information in this report has been compiled from sources we believe are reliable and we make no warranty in respect of its accuracy.
Updated on: 31 / 12 / 2021