Unit Trusts vs Investment Trusts

You’ve probably noticed we make a key distinction across our website between Unit Trusts (UT) and Investment Trusts (IT).

Both UTs and ITs are pooled investment vehicles, run by a manager who selects a portfolio of assets (shares, bonds etc.) on behalf of investors.

But there are some key differences between the two which you should be aware of before deciding which product might be best for you. We set these differences out below.


UTs are open-ended, so they can issue an unlimited number of shares and can keep getting bigger and bigger to accommodate investor demand. These units are offered directly to investors by fund companies.

On the other hand, ITs are closed-ended and therefore issue a fixed number of shares. These shares are offered by investment companies via an initial public offering, after which the shares are listed on an exchange. As such ITs are organised in the same fashion as a publicly-traded company.


ITs have the ability to adopt “gearing”, this means that the manager can borrow money to use for further investment if they see opportunity in a particular market. UT managers can use gearing as well, but are far more restricted in this area to do so.

In rising markets gearing can lead to gains being amplified, but when markets are falling the losses are exaggerated. This ability to borrow is one factor that, generally, makes ITs more volatile than their UT counterparts.


UT prices are fixed once a day at their Net Asset Value (NAV).

Being on an exchange means that IT prices are affected by market demand, and so their share prices may be bought/sold higher or lower than the NAV. These prices are intraday i.e. change during the day.


Feature Unit Trust Investment Trust
Structure Open Closed
Fixed number of shares
Independent board of directors
Widely available in an ISA/SIPP