UITs continue to grow as assets surpass $100 billion

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According to the Investment Company Institute, data on the market value of unit investment trusts (UITs) issued and outstanding at the end of 2014 show a total of 5,381 trusts worth $101.14 billion. dollars. According to reports submitted by major ITU sponsors to ICI, at the end of 2014 there were:

  • 2,287 tax-free bond trusts, with a market value of $12.11 billion
  • 591 taxable bond trusts, with a market value of $3.06 billion
  • 2,503 stock trusts, with a market value of $85.96 billion.

As of December 2014, total UIT deposits stood at $5.16 billion in December. For comparison, total ITU deposits were $4.80 billion in November 2014 and $4.87 billion in December 2013. This represented a 6% year-over-year increase for the month of December and an overall annual increase of 17% compared to 2013.

Total UIT Deposits by Type of Trust (thousands of dollars)

December 2014 November 2014 December 2013
Equity 5,046,543 4,730,066 4,743,716
Taxable debt 49,717 36,005 43,893
Tax-free debt 63,044 33,529 83,161
Total 5,159,304 4,799,600 4,870,770

In addition, 121 new trusts issued shares in December. Of this total, 111 were stock trusts, four were taxable bond trusts and six were tax-exempt bond trusts.

Over the past six years, while the number of ITUs in circulation has decreased by 10%, from 5,984 to 5,381, the total net assets invested in ITUs have increased by more than 254%, starting at approximately $28 billion at the end of 2008 and ending at the aforementioned level. 101 billion dollars at the end of 2014.

Number of Trust Investment Units (UIT) (end of year)

Source: Investment Company Institute, December 2014

Unit Investment Trust (UIT) Total Net Assets (millions of dollars, end of year)

Source: Investment Company Institute, December 2014

Interestingly, during this period, the overall decline in the number of trusts outstanding can be attributed to tax-free debt products, as the number of taxable equity securities and debt products actually increased.

Trust Category Number of % confidenceIncrease decrease)
Equity 5%
Taxable debt 72%
Tax-free debt (28%)
Total (ten%)

Asset trends tell a slightly different story, as all product categories saw increases in total assets, with the equity category leading the way with not only the largest percentage increase, but also the largest amount of lending. total net assets.

It should be noted that currently the category of stocks in the ICI reporting system includes a wide range of different investment types whose underlying strategies would not normally be associated with stocks (i.e. -to say. a closed-end municipal bond fund trust). This may distort the categorization of results, but it does not diminish the growing momentum with regard to ITU’s assets.

Trust Category Total net assets % increase/(decrease)
Equity 328%
Taxable debt 52%
Tax-free debt 88%
Total 254%

For those who may not be familiar with mutual funds, UITs are a fixed portfolio of securities issued with a fixed term. These types of portfolios allow investors to know what securities are held in an UIT on the date of filing, as well as the mandatory termination date of the trust. Although not common, a trust can be dissolved early, as described in the prospectus. UITs are a buy and hold investment strategy. In other words, the securities in the UIT portfolio do not normally change significantly over the life of the trust.

I believe that the popularity of UITs in recent years can be attributed to a number of factors, one of which is that many of the more popular UITs have primary investment objectives geared towards current dividend income. These same UITs may invest in income-producing securities which may tend to pay a higher level of current income than the more traditionally recognized income-producing securities (i.e. bonds).

These income-generating securities may include, but are not limited to, closed-end funds (which may or may not utilize leverage), preferred stocks, real estate investment trusts (REITs), business development companies (BDC), Master Limited Partnerships (MLP ) and Dividend Paying Stocks.

These strategies have proven particularly attractive in an interest rate environment characterized by the persistence of record low fixed income/debt yields – although this may begin to change towards the second half of 2015.

UITs have also grown in popularity with many advisors in recent years due to changing product mechanics, the entry of new UIT sponsors, and the underlying investment strategies that UITs now use. For example, in terms of mechanics, UITs can now be purchased using paid or standard CUSIPs to accommodate both paid advisors and commission-based advisors.

In terms of underlying investment strategies, there are now UITs with primary objectives of growth, income or total return. These strategies can be asset class (i.e. US large cap), sector (i.e. healthcare) or even theme (i.e. healthcare) focused. hedging the rising inflation rate). Therefore, I think it is always fair to say that “today’s UITs are not your father’s UITs.”

I encourage all investors to educate themselves on all aspects of UITs, including risks and expenses, in addition to understanding the investment strategy of each particular UIT before considering an investment.

Disclosure: Hennion & Walsh is the sponsor of SmartTrust® Unit Investment Trusts (UITs). The above overview is provided for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy IUT SmartTrust®.

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