Along with the explosive growth of the mutual fund industry, there has also been significant growth in the use of other packaged investment products. The lack of public attention to these products does not diminish their value in the portfolios of many clients. This module covers some of these investments, which-except for unit investment trusts-are professionally managed.

Unit investment trusts (UITs), the first topic in this module, are unmanaged, fixed portfolios. About two-thirds of assets in UITs are invested in stocks. Stock UITs are portfolios of individual stocks, which are liquidated at a certain date with the proceeds distributed to unit holders.

The second major focus in this module is on variable annuities. The Tax Reform Act of 1986 eliminated the tax advantages of a number of investments. One of the few investments that retained its tax advantages was the variable annuity. The characteristics and tax advantages of the variable annuity are fully explained in the pages that follow.

This module continues with coverage of mutual fund wrap fee programs. These programs allocate a client’s money, based on client information, among different funds in the programs.

The fourth topic is the fund-of-funds, which is a fund whose assets are the shares of other mutual funds. As explained, a fund-of-funds may be appropriate for an investor seeking broad diversification through a single fund.

Finally, this module considers offshore funds, which are usually offered to investors who are not U.S. citizens. Given this restriction, offshore funds will have limited use for most readers. Nevertheless, they may have applications for certain clients.

Author: Jason G. Hovde, MBA, CFP®

Jason G. Hovde is the investments professor at the College for Financial Planning. Prior to joining the College, Jason had a financial planning/investment advisory practice and was a branch manager for one of the largest independent broker/dealers in the country. Additionally, he spent several years with another independent broker/dealer, first as a trader and options principal, and then as a member of the senior management team. Jason holds two bachelor’s degrees, one in accounting and the other in behavioral science from Metropolitan State University of Denver, as well as an MBA in finance and accounting from Regis University. You can contact Jason at jason.hovde@cffp.edu.

Complexity Level: Intermediate