Most of the funds in the market can be classified into two categories: Mutual Fund and Unit Trust.
The Mutual Fund itself is a company, which mainly issues stocks to raise funds. For the Unit Trust, the company is established in the form of a trust and issues funds in the form of a trust deed.
Mutual Fund is established in the form of limited company, which are regulated by the company law. The shareholder is the beneficiary of the fund, who can redeem or purchase the shares unrestrictedly, and without affecting the registered capital. On the other hand, the Unit Trust Fund takes the form of trust as its basic legal system and is regulated by the trust law. Unit is issued by the trustee and its beneficiary is the unitholder, which is bounded by the contractual nature of the trust.
(c) Protection of Investor Rights
In general, the responsibilities of the custodian of a Mutual Fund is to safe keep the assets of the fund, process settlements and receive dividends to protect the interests of shareholders. Meanwhile, except the safekeeping duty, the trustee is responsible to ensure that the fund manager is acting properly. Ensuring that the operation of the fund is in accordance with the deed of the trust, that the calculation of the unit price of the fund is accurate and the dividends to investors are properly handled. However, in order to ensure the rights and interests of fund investors, the Securities and Futures Commission has asked the custodian of the Mutual Fund to provide investors with the same protection as the Unit Trust Funds.
(d) The Ultimate Responsibility
Although companies of Mutual Funds only have to pay limited liability, the directors of the fund should also bear their personal responsibility. On the other hand, the trustee of the Unit Trust Fund is the ultimate responsible person of the fund.
(e) Quantity to be Issued
The number of shares issued by Mutual Funds are limited, while the number of units that can be issued by a Unit Trust Fund is unlimited.