Unit Trust
How unit trusts work in Singapore, fees to watch out for, how they compare with ETFs, and whether they still make sense for your portfolio in 2026.
A unit trust is a professionally managed investment fund that pools money from multiple investors to buy a diversified portfolio of stocks, bonds, or other assets. In Singapore, unit trusts are sold through banks (DBS, OCBC, UOB), insurance companies, and platforms like FSMOne and Endowus, often with a sales charge of 1–5% and annual management fees of 0.5–1.5%.
Not financial advice. All figures are for educational reference only. Data as at Q1 2026 unless noted.
Table of Contents
What Is a Unit Trust?
A unit trust (also called a mutual fund in the US context) is a collective investment scheme where a fund manager pools money from many investors and invests it according to a stated investment objective. Investors buy “units” of the fund, and each unit represents a proportionate share of the fund’s total net asset value (NAV). The price per unit fluctuates daily based on the underlying portfolio’s market value.
In Singapore, unit trusts are regulated by the Monetary Authority of Singapore (MAS) under the Securities and Futures Act. They must be registered with MAS and provide a prospectus and product highlights sheet before sale. The fund’s investment mandate — such as “Asia Pacific equities” or “global bonds” — is set in the trust deed and the fund manager must invest accordingly. A trustee (usually a bank like HSBC Institutional Trust Services or Citibank) holds the fund’s assets independently from the fund manager, providing an additional layer of investor protection.
Unit trusts differ from exchange-traded funds (ETFs) in several ways. Unit trusts are priced once per day (at end-of-day NAV), bought and sold through distributors (banks, platforms, advisors) rather than on a stock exchange, and typically carry higher fees. ETFs trade on stock exchanges in real time, usually have lower expense ratios, and do not carry sales charges. However, unit trusts offer access to a wider range of strategies, including actively managed funds that aim to outperform a benchmark.
How It Works
When you invest in a unit trust, you pay a subscription price per unit that includes the NAV plus any applicable sales charge (also called a front-end load). For example, if the NAV is S$1.50 per unit and the sales charge is 3%, you pay S$1.545 per unit. Some platforms in Singapore offer 0% sales charge on selected funds — notably Endowus, FSMOne, and DollarDex.
Annual fees are deducted from the fund’s NAV automatically, so you do not see them as a separate charge — they reduce the fund’s returns. The total expense ratio (TER) includes the management fee (typically 0.75–1.5% for actively managed equity funds), trustee fee (0.02–0.05%), and other operating costs. Over time, even a 1% difference in TER can compound into a significant drag on returns. A fund charging 1.5% TER versus an ETF charging 0.2% TER will cost you approximately 26% more in fees over 20 years on the same underlying returns.
Unit trusts can distribute income (dividends, bond coupons) to unitholders or reinvest it into the fund. Distribution classes pay out periodically (monthly, quarterly, or annually), while accumulation classes reinvest all income. In Singapore, distributions from unit trusts are generally tax-free for individual investors — there is no dividend withholding tax or capital gains tax on unit trust distributions for Singapore tax residents.
Unit Trusts in Singapore
The unit trust market in Singapore is substantial, with over 2,000 authorised funds available to retail investors. Major fund managers with a strong Singapore presence include Nikko AM, Schroders, Aberdeen, BlackRock, JPMorgan, UBS, and Lion Global Investors. Many of these funds are available through the CPF Investment Scheme (CPFIS), allowing members to invest their OA and SA savings in approved unit trusts.
CPFIS unit trusts are a key consideration for Singapore investors. While CPFIS offers access to lower-cost funds (including index funds with TERs below 0.5%), the range is more limited than what is available through cash investments. The historical performance of CPFIS investors has been mixed — CPF Board data shows that a significant proportion of CPFIS members have earned returns below the OA interest rate of 2.5%, largely due to fees and poor fund selection. This has led to growing interest in passive investing through low-cost ETFs and robo-advisors instead.
Banks remain the largest distribution channel for unit trusts in Singapore, but the rise of digital platforms has disrupted the market. Platforms like Endowus, Syfe, and FSMOne offer unit trusts with 0% sales charge and trailer fee rebates (where the platform returns a portion of the fund manager’s distribution fee to the investor). This has reduced the effective cost of investing in unit trusts, making them more competitive with ETFs than they were five years ago.
Real-World Examples
A popular CPFIS-approved unit trust is the Nikko AM Shenton Thrift Fund, a Singapore equity fund with a TER of approximately 1.18%. An investor putting S$10,000 of CPF OA savings into this fund would pay no sales charge (CPFIS funds through CPF are typically at 0% sales charge) but would incur the 1.18% annual fee. If the fund returns 8% gross per year, the net return after fees is about 6.8% — compared to 2.5% left in the OA.
For a global equity example, the Lion-OCBC Securities Singapore Low Carbon ETF tracks a sustainability-screened Singapore index. However, a traditional unit trust alternative might be the Schroder Singapore Trust, which is actively managed and aims to outperform the STI. Over the last 5 years (2021–2025), actively managed Singapore equity unit trusts have had mixed results versus the benchmark, with roughly 40–50% underperforming the STI after fees.
Investors comparing unit trusts with REIT ETFs should note that the NikkoAM-StraitsTrading Asia ex Japan REIT ETF has a TER of ~0.55%, while an actively managed Asia REIT unit trust might charge 1.2–1.5%. The fee difference over 10–20 years is substantial and favours the ETF unless the active manager consistently outperforms.
Why It Matters for Investors
For Singapore retail investors, unit trusts remain a relevant tool — especially for CPF investing and for accessing strategies not easily available through ETFs (e.g. specific bond mandates, alternative strategies, or funds with regular distribution features). However, the fee landscape has shifted dramatically. With 0% sales charge platforms and trailer fee rebates now widely available, the total cost of owning a unit trust has fallen, narrowing the gap with ETFs.
The key decision is active vs passive. If you believe a skilled fund manager can outperform the market net of fees, a well-chosen unit trust may add value. If you prefer market-matching returns at the lowest cost, index ETFs or index unit trusts are more appropriate. For most Singapore investors building a long-term passive income portfolio, a core allocation to low-cost ETFs supplemented by selected unit trusts (e.g. for fixed income or CPFIS access) is a pragmatic approach.
When evaluating any unit trust, check the fund factsheet for TER, sales charge, historical performance vs benchmark, and the NAV trend. Compare these with ETF alternatives. Use tools like the TKN Retirement Calculator to project how different fee levels affect your long-term retirement outcomes.
Frequently Asked Questions
What is the difference between a unit trust and an ETF?
Unit trusts are priced once daily at NAV, bought through banks or platforms, and often carry sales charges and higher annual fees. ETFs trade on stock exchanges in real time, have lower expense ratios (typically 0.1–0.5%), and no sales charges. Both offer diversification, but ETFs are generally cheaper for passive investors.
Can I invest in unit trusts using CPF in Singapore?
Yes, through the CPF Investment Scheme (CPFIS). A curated list of MAS-approved unit trusts is available for investment using CPF OA and SA funds. CPFIS unit trusts typically have no sales charge when purchased through CPF, but annual management fees still apply.
Are unit trust returns taxable in Singapore?
For Singapore tax residents, distributions from unit trusts are generally tax-free. There is no capital gains tax and no dividend withholding tax on unit trust payouts. However, the fund itself may incur foreign withholding taxes on its underlying investments, which reduces the NAV indirectly.
How do I choose a good unit trust in Singapore?
Look at the total expense ratio (TER), historical performance vs its benchmark over 3–5 years, the fund manager’s track record, the fund’s investment mandate, and whether it is available at 0% sales charge on platforms like FSMOne or Endowus. Avoid funds that consistently underperform their benchmark after fees.
Is a unit trust the same as a mutual fund?
Essentially yes. “Unit trust” is the common term used in Singapore, the UK, and Australia. “Mutual fund” is the US equivalent. Both are collective investment schemes that pool investor money and are professionally managed. The legal structure differs slightly but the concept is the same.
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