ling asked in Business & FinanceInvesting · 1 decade ago

What is unit trust and Debenture, How can investment ?

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  • 1 decade ago
    Best Answer

    A unit trust is a form of collective investment constituted under a trust deed.

    Found in the UK, Ireland, Australia, New Zealand and British Isles offshore jurisdictions, unit trusts offer access to wide range of securities for all types of investors.

    Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price. Each fund has a specified investment objective to determine the management aims and limitations.

    In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is similar to a bond except the securitization conditions are different. A debenture is unsecured in the sense that there are no liens or pledges on specific assets. It is however, secured by all properties not otherwise pledged. In the case of bankruptcy debenture holders are considered general creditors.

    The advantage of debentures to the issuer is they leave specific assets unencumbered, and thereby leave them open for subsequent financing.

    In practice the distinction between bond and debenture is not always maintained. Bonds are sometimes called debentures and vice-versa.

    In the United Kingdom debentures have frequently been used as a mechanism for raising funds to build or finance sports or leisure venues. Often these debentures pay little or no interest, but entitle the holder to privileges tickets for the venue. For example, the All England Lawn Tennis and Croquet Club first issued debentures in 1920 in order to purchase the current premises in Wimbledon, London, and debenture issues take place every five years. The 2001-2005 debenture issue was priced at £2,000 each, with an additional premium of £18,000, and Value Added Tax of £3,150; holders of these debentures are entitled to a free seat in the Centre Court Stand for each day of the championships for five years, and have access to exclusive lounge and catering facilities. At the Royal Albert Hall debenture holders are known as members; they own rights to individual boxes, and are entititled to view almost all performances. In 2003 Box 70 was offered on the open market for £250,000 [1]. Other stadia financed through the issue of debentures include Millennium Stadium, Wembley Stadium, Arsenal, Twickenham Stadium and Trent Bridge in Nottingham.

    Another definition of debenture

    A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

    Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

    Another definition of Unit Trust (UT)

    An unincorporated mutual fund structure that allows funds to hold assets and pass profits through to the individual owners, rather than reinvesting them back into the fund.

    In the U.K. the term "unit trust" is synonymous with "mutual fund" as it is used in North America.

    Unit Investment Trust (UIT)

    A registered trust in which a fixed portfolio of income-producing securities are purchased and held to maturity. Commonly used with municipal bonds, investors receive an undivided interest of the portfolio's principal as well as income proportionate to the amount they invested.

    Each unit typically costs $1,000 and is sold to investors by brokers. UITs can be resold in the secondary market.

  • 1 decade ago

    debenture is a no collateral bond and i am not sure about unit trust but i think it is like a mutual fund ...maybe investopedia.com can help you

  • 3 years ago

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