A managed investment trust (MIT), also known as a managed fund or a managed investment scheme, is a financial structure that allows multiple investors to pool their money together to invest in a diversified portfolio of assets. These assets can include stocks, bonds, real estate, commodities, and other investment instruments.
Here’s how a managed investment trust typically works:
Pooling of Funds: Investors contribute their money to a common pool managed by a professional fund manager or management company.
Diversification: The fund manager uses the pooled funds to invest in a diversified range of assets, which helps spread risk and potentially achieve better returns than an individual investor might achieve on their own.
Professional Management: The fund manager is responsible for making investment decisions based on the fund’s objectives and investment strategy. This includes selecting and managing the assets within the fund.
Investor Shares: Investors in a managed investment trust are issued units or shares in the trust, proportional to the amount of money they’ve invested. These units represent a portion of the underlying assets held by the trust.
Income and Capital Gains: Any income generated from the assets within the trust (such as dividends, interest, or rental income) is distributed among the investors in proportion to their holdings. Similarly, any capital gains or losses from the sale of assets affect the value of the units.
Liquidity: In many cases, investors can buy or sell their units in the managed investment trust on an open market. This provides a level of liquidity, allowing investors to enter or exit the investment relatively easily. However, the liquidity may vary depending on the type of trust and the underlying assets.
Fees: Investors typically pay management fees and other associated costs for the professional management of the trust. These fees are used to cover administrative expenses, fund management, and other services.
Managed investment trusts can take various forms, such as mutual funds, exchange-traded funds (ETFs), and unit trusts, depending on the country and jurisdiction. They offer individual investors an opportunity to access a professionally managed and diversified portfolio without having to directly manage each investment themselves.
It’s important for investors to carefully consider the objectives, risks, and fees associated with a managed investment trust before investing, as performance can vary based on the fund’s strategy, the quality of the fund manager, and market conditions.