Mutual Fund vs Unit Trust: What’s the Difference?

What do they have in common?

Mutual funds and unit trusts are both open-ended pooling vehicles — shares or units redeemable at the day’s NAV — and both are regulated by the SFC. Most retail funds fall into these two types: managers pool investors’ money to buy a basket of securities toward stated objectives, offering professional management and diversification. Fundraising purpose, capital structure and regulator are essentially the same.

How do they differ?

In form, a mutual fund is a limited company issuing shares; a unit trust is constituted as a trust issuing units. Governing law differs too: company law for mutual funds, trust law for unit trusts. On investor protection, a unit trust’s trustee must — beyond safekeeping assets — ensure the manager acts properly and unit prices are calculated accurately; the SFC now requires mutual-fund custodians to offer equivalent protection.

Which form do MPF funds take?

MPF’s approved constituent funds are mostly unit trusts. To explore different funds’ fees and performance, visit MPF fund comparison.