How different is a UITF from a CTF?
The main difference between a UITF and a CTF is the manner which the NAV is calculated. CTFs are valued using the accrual method (i.e. NAV of the funds takes into account principal and interest accruing from various investments of the fund). This method generally results in a steadily increasing NAV per unit. UITFs, on the other hand, follow the marked-to-market valuation method, which calculates the NAV based on estimated fair market value of the assets of the fund based on prices supplied by independent sources. The marked-to-market value takes into account the accrued interest (and dividends where the fund is invested in equities) plus unrealized gains or losses of the investments given their prevailing market prices. As such, UITF NAVPU may fluctuate depending on the volatility of the prices of various assets held by the fund.
