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Unit Trusts


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.