Unit Investment Trusts (UITs)
Investment companies that assemble a fixed, unmanaged portfolio for a set life and sell redeemable units; there is no board of directors, no investment adviser, and no ongoing trading of the portfolio.
The exam loves to make you classify the third investment-company type under the Investment Company Act of 1940. The tell is a portfolio that is assembled once and not actively traded — if a question says shares are “actively managed” or have “a board and an adviser,” it is a mutual fund, not a UIT. The answer usually hinges on the absence of a manager and on redeemable units with a fixed termination date. Watch the classic crossover: a variable annuity’s separate account is typically registered as a UIT, so a VA question can secretly be a UIT question.
Don’t confuse the three structures. Mutual funds continuously issue and redeem at NAV under forward pricing; closed-end funds trade on exchanges at a premium or discount to NAV; a UIT does neither — units are redeemed by the sponsor/trustee, never exchange-traded. The trap is calling a UIT “managed” because the sponsor picked the holdings — selection at inception is not ongoing management. Memory hook: a UIT is “set it and forget it,” then self-liquidates.
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