How UAP dollar unit trust works

UAP has launched a new dollar denominated unit trust this morning. This fund will offer investors an opportunity to diversify their investments into foreign currencies. The fund will mainly invest in offshore securities. All existing clients will have dollar accounts on their dash boards so you will be able to invest if and when you have dollars. There is no need to open another account for existing customers. A minimum lumpsum of $1,000 is required with monthly/regular top ups of at least $100. The fund will operate in a similar way to the other existing funds and will accrue interest daily.

Unit trusts are what you would call collective investment schemes. Basically, different people pool resources and hand them to an investment manager who manages the investment on their behalf. In Uganda, unit trusts are regulated by the Capital Markets Authority (CMA) under the Collective Investment Scheme Act, 2003. The market has grown tremendously as adoption and awareness have improved. Currently unit trusts hold about ugx 2 trillion in assets under management with over 60,000 investors.

There are several benefits to investing in unit trusts. First, unit trusts are a very simple investment vehicle. It’s very easy to sign up because all you need is some kind of identification, and in this case, only US$ 1,000 to start and thereafter regular deposits of $100. There is no active management by the investor. It’s really a passive form of investment. Most of the funds provide monthly statements and online access to monitor your investment. So they are ideal for working people who don’t have the time or energy to run side hustles or businesses. This particular dollar unit trust is ideal for people in the diaspora, international traders, and anyone who earns in dollars.

Second, unit trusts are quite flexible. There are several options to choose from depending on your needs. You can also deposit and withdraw any amount of money at any time. This flexibility provides a truly liquid investment.

Third, the interest is moderate given the low-risk nature of unit trusts. Most of the underlying assets are regulated assets like treasury bonds and bills. You can also benefit from the compounding effect by leaving your funds intact for some time. Typically, this dollar unit trust is expected to earn about 5% per year. Also, the interest income earned by unit trusts is currently tax-exempt.

Finally, unit trusts are regulated by the CMA. There is also a governance structure?around them. For this unit trust, the actual assets are held by a custodian who is Stanbic bank. There is also a trustee (KCB) who oversees the whole operation. Plus, you have a professional manager (UAP) who actually does the fund management. Because of this regulation, unit trusts are fairly safe compared to other investments.

From my experience, the best approach to investing in unit trusts has been to first identify my investment goal. For example, it could be saving up for school fees. I then typically automate the saving decision using a monthly standing order. So every month, some money is automatically sent to my unit trust whenever I am paid. This simple practice has enabled me to accumulate some liquid cash that I can use to meet my everyday needs.

In conclusion, unit trusts are some of the simplest investment vehicles out there. They are fairly safe, passive, give moderate returns, and are quite liquid. This new innovation by UAP is a welcome development in our capital markets and I would definitely recommend anyone to have the UAP dollar unit trust as part of their asset portfolio.