You put your money in a Unit Investment Trust Fund (UITF) and the net asset value per unit (NAVPU) is higher than when you first invested. You’ve reached the end of your investment’s recommended holding period. It’s time for redemption.
Remember when you first invested in the UITF? Putting your money in a UITF by exchanging your money for units in the fund is called a subscription. . Redemption is the opposite – it’s when you exchange units for money.
When you get your money back
How soon you get the money depends on the kind of fund and what time you ordered the redemption. UITFs with money market funds can be redeemed quickly – some, within the day they’re processed. Funds that contain stocks take longer because fund managers have to work within the stock market’s trading hours. (See also: What are equity funds?).
Banks process UITF orders for subscription and redemption in batches, so they normally have a cutoff period for orders. After this period, it will be processed on the next banking day.
For example, if your bank’s cutoff for UITF orders is at 1 pm and you make your order redemption at 2 pm on a Friday, then the processing starts on Monday. If redemption takes 1 day, you’ll get your money on Tuesday.
The money you get is based on the NAVPU of the day your order is processed. So, given the example above, your redemption will be based on the NAVPU on Monday.
Partial redemptions
When redeeming, you don’t have to pull all of your money out. Some investors make what is called a partial redemption, where they sell only some of their units and keep the rest. Doing this lets you lock in some of the money you’ve already gained from your investment while still having potential for your money to grow.
