Unit Investment Trusts (UITs) 

 
A Unit Investment Trust (UIT) is a registered investment company that offers a fixed portfolio of equity and/or fixed income securities. These securities are chosen by professional money managers to accomplish the stated investment objectives of the trust for a set period of time.

Overview 

Fixed UITs 

Equity UITs 

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Unit Investment Trust Overview

The investment portfolio of a Unit Investment Trust is available for purchase in the form of units, which represent an investor's undivided stake in the total portfolio. UITs allow an investor to receive regular income from the trust, depending upon the type of UIT.

  • Fixed Income UITs—Designed to generate a relatively predictable and stable stream of income over the life of the trust.
  • Equity UITs—Designed to achieve specific investment objectives through portfolios which historically have greater growth potential but also have a higher degree of risk.

UITs offer investors an opportunity to easily diversify their investments and to allocate assets across a broad range of securities. Choosing a combination of fixed income and equity UITs can be an important component of a successful investment strategy.

The nature of UITs is unique in that it offers the individual investor diversification, professional investment selection, distributions, and reinvestment and rollover options—all within a fixed portfolio of securities.

Unit Investment Trusts are available through Northwestern Mutual Investment Services, LLC.

Unit Investment Trusts are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. Your Northwestern Mutual Investment Services Registered Representative can provide you with a prospectus that will contain the information noted above, and other important information that you should read carefully before you invest or send money.

All securities are offered through Northwestern Mutual Investment Services LLC, (NMIS), Suite 600, 611 E. Wisconsin Avenue, Milwaukee, WI 53202, 1-866-664-7737. Member FINRA and SIPC. NMIS is wholly owned by Northwestern Mutual.

Fixed Income Unit Investment Trust

A fixed income Unit Investment Trust (UIT) is a registered investment company that offers a fixed portfolio of fixed income securities. These securities are chosen by professional money managers to accomplish the stated investment objectives of the trust for a set period of time.

A variety of fixed income UITs exist, and are designed to generate a relatively predictable and stable stream of income over the life of the trust. Fixed income UITs are portfolios comprised of state and national municipal bonds, corporate bonds, international bonds and government-backed or mortgage-backed securities.

The portfolios of these UITs are fixed, meaning that the investor knows, upon purchasing units of the trust, which types of securities are being purchased, the stated maturities, quality ratings, call dates and expected income. Low minimum investment amounts are available in a UIT. Investors may purchase units for as little as $1,000.

Fixed income UITs provide income on a monthly, quarterly or semi-annual basis.

Types of Fixed Income UITs

  • Tax Exempt—Focus on municipal bonds typically issued to finance public projects such as schools, highways and hospitals. These trusts are often structured to provide regular tax-exempt income and may even be structured to include only the highest rated bonds, or bonds localized to a particular geographic region. Municipal bonds in the portfolio may have an average life from 5 to 30 years. Although certain securities may be exempt from federal income taxes, state or local/municipal and federal alternative minimum taxes may apply.

  • Taxable—Focus on corporate or international bonds, or government or mortgage-backed securities. These trusts are structured to provide regular income. The bonds included in the portfolio may have an average life from 5 to 30 years.

  • Corporate Bond Trusts—Offer a variety of bond quality ratings, encompassing a broad spectrum of investment objectives and levels of risk tolerance.

  • International Bond Trusts—Offer the opportunity to diversify into global markets that may not otherwise be accessible to the individual investor. These trusts are also associated with a higher level of volatility, which often accompanies the potential for higher returns.

  • U.S. Government Securities—Offer minimal risk to investors looking to hold government securities such as U.S. Treasury bonds. These trusts offer monthly income, free from state and local taxes.

  • Mortgage-Backed Securities—Offer investors the opportunity for a high level of income by holding mortgages backed by agencies of the U.S. Government. These agencies can include the Government National Mortgage Association (GNMA) and the Federal Home Loan Mortgage Corporation (FHLMC). These trusts usually distribute interest and principal on a monthly basis, although the interest amount varies over the life of the trust.

Unit Investment Trusts are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. Your Northwestern Mutual Investment Services Registered Representative can provide you with a prospectus that will contain the information noted above, and other important information that you should read carefully before you invest or send money.

No investment strategy can guarantee a profit or protect against a loss.

All securities are offered through Northwestern Mutual Investment Services LLC, (NMIS), Suite 600, 611 E. Wisconsin Avenue, Milwaukee, WI 53202, 1-866-664-7737. Member FINRA and SIPC. NMIS is wholly owned by Northwestern Mutual.

Equity Unit Investment Trust

An Equity Unit Investment Trust (UIT) is a registered investment company that offers a fixed portfolio of equity securities. These securities are chosen by professional money managers to accomplish the stated investment objectives of the trust for a set period of time.

A variety of equity UITs exist, designed to achieve a broad range of investment objectives. The investment portfolios of equity UITs are comprised of stocks, which historically have greater growth potential, but also have a higher degree of risk.

Trust portfolios offer investment strategies from conservative to aggressive growth. Investment minimums can be as low as $1,000 or $500 for qualified money.

A diverse portfolio of equities are combined and offered to investors in the form of units, which entitle the unit holder to a share of the principal and dividends of the trust. The array of equities offered in an equity Unit Investment Trust make it possible for a single investor to diversify their funds without committing a large sum of cash to multiple equities.

Types of Equity UITs

  • Sector —Focus on specific areas of the market in an attempt to capitalize on emerging trends in those areas. Sector trusts can be broadly focused or narrowly focused on a specific subsector. Typically, sector trusts strive to achieve above-average capital appreciation. The maturity of a sector UIT usually ranges from 15 months to 5 years.

  • Strategy—Focus on the potential for capital appreciation through strategies that have historically outperformed specific indices and the market as a whole. The strategies employed in a UIT may be based on major domestic or international indices. The maturity of a strategy UIT is usually one year, although the strategy of the UIT itself is based upon a long-term investment objective.

  • Theme—Focus on particular market opportunities that demonstrate potential for capital appreciation. Equity trusts may cover several sectors. The underlying strategy always attempts to capitalize on trends in those sectors. The maturity of a theme UIT usually ranges from 15 months to 5 years.

  • Index—Focus on average annual returns similar to major indices such as the Dow Jones Industrial Average, NASDAQ 100 or S & P 500. Uniquely, index UIT portfolios are reviewed periodically and may change, which would result in taxes for the unit holder. The maturity of an index UIT usually ranges from 6 to 25 years.

Unit Investment Trusts are offered and sold by prospectus only. You should carefully consider the investment objectives, risks, expenses and charges of the investment company before you invest. Your Northwestern Mutual Investment Services Registered Representative can provide you with a prospectus that will contain the information noted above, and other important information that you should read carefully before you invest or send money.

The investment portfolios of equity UITs are comprised of stocks, which have historically offered greater growth potential with corresponding higher risk.

No investment strategy can guarantee a profit or protect against a loss.

All securities are offered through Northwestern Mutual Investment Services LLC, (NMIS), Suite 600, 611 E. Wisconsin Avenue, Milwaukee, WI 53202, 1-866-664-7737. Member FINRA and SIPC. NMIS is wholly owned by Northwestern Mutual.

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