What are the main differences between investmentcompanies and unit trusts?
1. Share capital – fixed or variable Investment companies have a fixed share capital. Their shares are issued for public subscription and thereafter, are bought and sold via the stock market, with a constant number of shares in issue. Unit trusts, on the other hand, issue and redeem units subject to demand and supply, so the number of units in issue varies daily. The manager of an investmentcompany does not have to take account of inflows/outflows of money and can, therefore, take a longer-term view of investments.This is an advantage for the investmentcompany investor. 2. Ability to invest borrowed money As public limited companies, investment companies can borrow money to enhance returns to shareholders over the longer term. This is called “gearing”. Shareholders’ returns are enhanced when the manager invests this borrowed money in the chosen portfolio and beats the cost of borrowing. Each company will have its own policy towards gearing and those that adopt long-term gearing as part
