Frequently Asked Questions 
31/08/2009 
 

Chapter 6 Products - Securities Market

6.8

Unit Trust / Mutual Fund  


6.8.1    

What is a unit trust/mutual fund?

In general, “units” of a unit trust/mutual fund are sold to investors and the unit trust/mutual fund invests contributions from investors in a portfolio of securities.

The Securities and Futures Ordinance defines a unit trust as any arrangement made for the purpose, or having the effect, of providing facilities for the participation by persons as beneficiaries under a trust, in profits or income arising from the acquisition, holding, management or disposal of securities of any other property whatsoever.

A unit trust/mutual fund is man aged by fund managers of an investment firm.  It can invest in bonds, foreign currencies, stocks, futures, options, gold and others.

 

6.8.2

What are the differences between mutual funds and unit trusts?

Mutual funds and unit trusts are similar.  A mutual fund is established as a limited liability company where investors are like shareholders in a company.  A unit trust operates under a trust system where investors’ assets are entrusted to trustees.

 

6.8.3

What conditions will trigger the suspension of trading in unit trusts/mutual funds listed on the Exchange?

To safeguard the interests of investors, trading in unit trusts/mutual funds may be suspended under exceptional conditions, such as when trading in a market where a unit trust/mutual fund has heavily invested is suddenly halted. Suspension is usually at the discretion of fund managers and trustees will be consulted beforehand. Fund managers have to notify the Securities and Futures Commission (SFC) of the arrangements for the trading suspension so that the SFC can closely monitor the situation and make sure the decision is reasonable.