Investment trust funds are more prevalent in United Kingdom. It is a closed ended fund which produces income from its investments. Investment trust fund typically operates just like mutual funds in issuing redeemable units. They buy the units or securities from the investors for an approximate NAV. Many types are available in this fund like Unit Investment Trust fund called UIT, Real-Estate Investment Trust fund called REIT, and Californian Investment Trust Fund and much more.
In case of Unit Investment Trust fund, it can be bought in terms of Units. Usually the fund manger will announce a public offering for specific period and specific units. But by making use of sponsors you can sell the units for additional price in the secondary stock market. Most commonly these funds have a termination date. In other words, it is the date in which your bonds or securities will be dissolved and the money will be returned back to you with higher returns. In case if investments in bonds are made, the date of maturation of the bond will be its termination date.
There are lots of Social Security Trust Funds in U.S.A. The money collected in the form of pay-roll taxes is credited to these trust funds for further investment in Government bonds or Treasuries. Out of one dollar paid as taxes by public, 70 cents are credited to the trust fund for meeting the financial expenses of retired persons above 62 years. And 19 cents from one dollar is credited to fund which takes care of medical facilities and the balance 11 cents is rooted to separate trust fund. Here the investment trust fund takes advantage from all tax payers in the country.
Another type of investment trust fund is Child Trust Fund. The investments made on this fund will meet the demands of the children as they mature as adults. They can gain access to the account only after 18 years but any one can open the account with child trust fund. They are lots of such funds in United Kingdom.
Investment trust funds are governed by the Investment Company Act of 1940. This law dictates and directs the operation of several investment companies like mutual funds, and unit investment trust fund. Commission charges and fees to be deducted from the investors are also regulated by this law from time to time.
Before investing in any investment trust fund, you should always read the prospectus thoroughly which includes the objectives and terms of the fund. Annual report of income and expenditure statement will be sent to you if you are a holder of such investment trust fund.