Unit Investment Trusts 101
What are UITs?
Unit Investment Trusts (UITs) are a fixed portfolio of stocks, bonds or other securities. These types of portfolios allow investors to know what securities are held within a UIT as of the date of deposit, as well as the mandatory termination date of the trust. While it is not common, a trust may terminate early as described in the prospectus. UITs offer an attractive opportunity for investors to own a portfolio of securities via a low minimum, typically liquid investment. As a point of contrast, while many actively managed funds continually buy and sell securities, thereby changing their investment mix, the securities held in a UIT generally remain fixed.
How are UIT securities chosen?
Some UIT securities are chosen according to a quantitative selection process determined by a sponsor while some are based on an index. Other UITs are chosen by experienced analysts or portfolio managers, who research the securities and screen them for various characteristics, according to specific objectives. Once securities are selected, the UIT portfolios are then supervised accordingly throughout the life of the trust.
Can a security held in a UIT be removed at any time?
While it is rare, a security held in a UIT may be removed from a portfolio under certain circumstances, such as a significant decline in credit rating. By and large, securities held in a UIT remain fixed for the life of the trust, regardless of market value.
What are the minimum investments in SmartTrust® UITs?
Typical minimums are 100 units, however, the minimums may vary based on the UIT. Higher minimums may also be required by each respective brokerage firm.
Are UITs suitable for my retirement accounts?
Unit trusts may be an appropriate investment vehicle for IRAs or self-employed retirement plans. They offer a variety of investment opportunities — ranging from relatively conservative to more aggressive investments — in both domestic and international markets.
What are my options when a UIT matures?
Option #1: Rollover
Investors may roll over into a new series of the same trust, if available, or any other SmartTrust® UIT available in the primary market*
*Maturity rollover is considered a taxable event. Please refer to each trust’s prospectus for complete rollover option information. Investors should be aware that there is a time limit to notify the trustee of the rollover.
Option #2: Maturity
Investors may do nothing and allow the portfolio units to mature. The trust will liquidate and they will receive a cash distribution of the trust’s proceeds, if any.
Option #3: In-kind distribution
Investors may generally request an in-kind distribution of the securities underlying the units if they own 2,500 or more units at either the time of purchase or maturity. Please see additional provisions set forth in the prospectus. SmartTrust® Unit Investment Trusts are generally long-term investment strategies and investors should consider their ability to invest in successive portfolios, if available. Investors should consult their tax advisor to determine tax consequences associated with an investment from one portfolio to the next, if available. Neither Hennion & Walsh, Inc. or Hennion & Walsh Asset Management, Inc. provide tax advice. Please refer to the trust prospectus for more complete in-kind distribution information. In-kind distribution is generally available for stocks traded and held in the United States. In-kind distribution may be modified or discontinued at any time without notice.
Can I sell my units?
You may sell all, or a portion of, your units any day the stock market is open. You will receive the then-current net asset value of the units, based on the current market value of the underlying securities in the portfolio, less any remaining deferred sales charge, as of the evaluation time. As the market fluctuates, of course, so will the value of your units. Therefore, your units may be worth more or less than what you originally paid.
How are UITs priced?
UITs are priced at the end of each business day similar to mutual funds. The price is based on the market value of the underlying securities and includes cash and other assets and liabilities held by the trust.
Are UITs eligible in commission and fee/wrap accounts?
UITs are available in a sales charge structure for commission accounts as well as for fee/wrap accounts. It is best to check with your individual brokerage firm to see if UITs are eligible for your fee/wrap platform.
Are UITs regulated?
Unit investment trusts are one of three basic types of investment company. Investment companies are subject to stringent federal laws and oversight by the U.S. Securities and Exchange Commission (SEC). It is important to note that the SEC does not approve or disapprove of UITs or the securities within a given UIT or pass upon the adequacy of any prospectus for a given UIT. Investment companies are regulated primarily under the Investment Company Act of 1940. This federal statute is highly detailed and governs the structure and day-to-day operations of investment companies. Investment companies are also subject to regulations of the Securities Act of 1933, FINRA, and the Securities Exchange Act of 1934.
How do I obtain information regarding IRS Form 8937 and appendix?
To see IRS Form 8937 and appendix, please click below:
2012 BNYM_Federal Form 8937_App A and B
2013 BNYM_Federal Form 8937_App A and B
2014 BNYM Federal Form 8937_App A and B
2015 BNYM Federal Form 8937_App A and B
2016 BNYM Federal Form 8937_App A and B
2017 BNYM Federal Form 8937_App A and B
2018 BNYM Federal Form 8937_App A and B
2019 BNYM Federal Form 8937_App A and B
2020 BNYM Federal Form 8937_App A and B
2021 BNYM Federal Form 8937_App A and B
How do I get more information on SmartTrust® UITs?
To get more information on any of our SmartTrust® UITs, or to schedule a meeting/conference call with one of our external wholesalers, our National Sales Director or our Chief Investment Officer, please contact our Internal Support Desk at (888) 505-2872.
How do I obtain a Trustee Annual Report?
To obtain a digital copy of a 2022 Trustee Annual Report, please utilize the following link:
To obtain a physical copy, please call the following toll free number: (800)-428-8890.