What is an ITU and how do you invest in it?


Randy (left) and Paul Watt, co-founders of ITU Investing

A mutual fund, like its brother investment companies, buys and holds a portfolio of stocks, bonds or other securities. Bond investors in particular may be interested in UITs, but many advisers ignore them. A Chicago-based company wants to make ITUs more accessible to advisors and their clients.

UIT Investing, a Chicago-based company co-founded in 2017 by brothers Randy and Paul Watts, launched what it called the first research platform dedicated to mutual funds (UIT) designed for advisors and the public.

When this reporter admitted in an interview with the brothers that he knew much less about UITs than about mutual funds, ETFs and closed-end funds, and that perhaps many advisers were also less than Informed about ITUs and their place in client portfolios, ITU Investing CEO Randy Watts agreed, saying, “You’ve hit the nail on the head.”

While UITs existed before ETFs and closed-end funds and are one of the four types of investment companies registered in the United States (RICs), “no one knows much about them because lack of data and analysis, ”Watts said. “This is one of the issues we hope to solve” with ITU Investing’s offering, arguing that much of the growth among ETFs and closed-end funds has come from the amount of data available to advisors and end investors.

Data from the Investment Company Institute shows that the ITU universe is relatively small; there were 5,035 trusts in the United States worth $ 84.94 billion at the end of 2017. In contrast, ICI reported that there were 1,856 ETFs with assets of 3,470 billion dollars in January 2018; for mutual funds, as of the same date, ICI said there were 7,988 mutual funds with net assets of $ 19.32 trillion. The latest data from ICI (as of June 2017) showed that there were 533 closed funds with assets of $ 271 billion.

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Drawing on his experience in launching new ITU series and building ITU infrastructure at companies such as Van Kampen, Nuveen and InCapital, Randy Watts authoritatively asserts that “investments are driven by research”, and he believes that providing ITU research in an easy-to-use, affordable online format will help ‘build the fabric’ and ITU investments among the advisers.

The majority of ITU usage has traditionally come from commission-based advisors in broadcast channels and regional brokers, but Watts notes that “we are slowly seeing a transition to the advisory channel; that’s where the market is going. Specifically, this growth is in wrap programs and representative accounts as a wallet, says Watts, to the point that usage is now “50% wrap; 50% wire.

How do ITUs work?

Unlike a mutual fund or ETF, an ITU is closed-ended – the fund’s stocks and bonds are generally not traded and ITU has a maturity date, on which its assets are distributed among investors. . While there are UITs of stocks and bonds, equity investors often prefer mutual funds or ETFs.

Are ITUs a Good Investment?

What are the benefits of ITUs for end investors? Randy Watts says “benefit number 1” is the ITU transparency. “Every investor knows exactly what they own in ITU” when an ITU is launched, and holdings do not change until the trust reaches maturity (there are some exceptions to this rule, for example when a trust company goes bankrupt).

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Shanta Harris

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