Definition
What is Unit Trust?
A common fund structure under the FMCA where investors hold units representing a proportionate interest in the trust assets, held by a supervisor on the investors' behalf.
A unit trust is one of three primary fund structures available to NZ managed investment schemes (the others being limited partnerships and company-managed funds). Per the FMCA 2013 Part 4, a unit trust requires:
Three roles, three documents: 1. Manager — issues units, makes investment decisions, charges management fees. Must be licensed under the FMCA (for MIS) or registered on the FSP Register (for wholesale-only). 2. Supervisor — independent third party holding the trust assets on behalf of investors, monitoring the manager's compliance with the trust deed. Common NZ supervisors include Public Trust, Trustees Executors Limited, and The New Zealand Guardian Trust Company Limited. 3. Trust deed — the constitutional document specifying powers, fees, redemption mechanics, distribution rules, and termination provisions.
Why unit trusts dominate NZ wholesale credit / property funds: the unit-trust structure cleanly separates investment management (the manager) from asset custody (the supervisor), which simplifies AML/CFT compliance, audit, and investor reporting. Most NZ first-mortgage funds (FMT, Squirrel, Pallas, Hunter, Midlands) use unit-trust structures.
Tax treatment: unit trusts can elect PIE status if they meet the Income Tax Act 2007 PIE eligibility criteria. PIE unit trusts taxed at investor PIR (capped at 28%); non-PIE unit trusts have trust income taxed at the trust level (33%) and distributions carrying imputation credits.
Wholesale-only unit trusts: offered under FMCA Schedule 1 do not need to be on the Disclose Register or have a retail-grade PDS. Manager licensing requirements still apply (MIS Manager licence under FMCA Part 6, subject to FMA supervision).
Related Terms
Managed Investment Scheme (MIS)
A collective investment vehicle where investor funds are pooled and managed by a professional manager.
Limited Partnership (LP)
A fund structure where investors are limited partners with flow-through taxation and liability limited to their investment.
PIE Fund (Portfolio Investment Entity)
A tax-efficient fund structure where tax is calculated at your Prescribed Investor Rate, often lower than marginal rates.
Private Credit
Non-bank lending to businesses and property developers, offering regular income and typically secured positions.
Official Resources
Educational Content Disclaimer
This glossary provides general educational information only and does not constitute financial, legal, or tax advice. Definitions and explanations are simplified for educational purposes and may not cover all aspects or nuances of each term.
Before making any investment decision, you should seek independent advice from appropriately qualified professionals. Wholesale Investor does not recommend or endorse any particular investment, strategy, or fund manager.