Redemption
is another word for getting your money out. It's vital that each
investor understands the redemption regime of their unit trust.
Broadly speaking, you should get your money within a week of selling
your unit trust, but this is always dependent on the liquidity
of the underlying investment. It's important to realise that redemption
of your units is at the discretion of the fund manager. Their
intention will be to refund your money within the timeframe set
out in the investment statement. However, they do have the right
to halt redemptions in extreme situations, if in the best interests
of the fund. Note, though, that redemptions are only very rarely
frozen.
There are two methods of redemption: the reverse
order rule (also known as the ordering rule) and the slice rule
(also known as the direct redemption and manager buy-back methods).
Each of these methods has tax implications.
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