Learn About Equity Trust Reviews

• Equity trusts pool money from investors in order to purchase a portfolio of stocks.
• Equity trusts typically offer investors a higher rate of return than money market funds.
• Equity trusts are taxed differently than mutual funds, and are often characterized by their degree of risk.
• Equity trusts are pooled investment vehicles for equities (stocks), which fall under the category of securities.
• They aggregate funds from a wide range of investors, which affords them a broader market exposure than mutual funds, which are restricted to a defined set of investors.

The market for trust products has steadily grown since the turn of the century, as market makers and institutional investors alike seek to diversify their portfolios.
Equity trusts, a type of investment vehicle that pools money from various investors in order to purchase a portfolio of stocks, are one of the more popular types of trust products.
A trust trust is an entity created by a trust agreement, under which a trustee holds legal title to property for the benefit of beneficiaries.

Pros Explained

- Safeway Equity Trust is a closed-end fund that invests in the equity securities of companies listed on the S&P/TSX 60 Index.
- The trust's portfolio is diversified.
- Investors receive distributions twice a year, in June and December.
- The fund has a relatively low management fee.
- It has low trading activity, which makes it less volatile and a better buy-and-hold investment.

Cons Explained
- The trust's performance has been subpar in the long-run.
- The trust's distributions are taxed at the trust's marginal tax rate.
- The fund's management fee is high.
- It has limited liquidity.
- The trust is only available for investment by accredited investors.

Cons Explained

• Investors tend to buy equity trusts because they offer better liquidity than direct stock investments.

• However, equity trusts are debt instruments, so while they offer higher returns than direct stock investments, they come with higher risk.

• Equity trusts are exempt from capital gains taxes, which offers investors a tax break.

• An investor can redeem or sell an equity trust within 30 days of purchase.

• Equity trusts are illiquid investments, which means that they are not traded frequently.

What Is a Trust-Backed Security?

The Securities and Exchange Commission (SEC) regulates securities issued and sold by corporations. The SEC reviews each offering of securities to ensure they meet certain legal requirements. This process is called a "trust review."
A trust review involves:

Issuing a public security;

Raising capital;

Issuing a financial report;

Making periodic financial reports available to investors; and

Providing information for the SEC's Electronic Data Gathering, Analysis, and Retrieval System (EDGAR).

What Is a Trust Preferred Security?

A preferred security is a debt instrument issued by a corporation.
These issues are similar to traditional bonds in that they are fixed-income instruments, but with an additional feature. Unlike a traditional bond, the issuer of a preferred security has the option of paying out an agreed upon, fixed dividend to shareholders.

Preferred securities are investment grade debt instruments that typically pay a dividend. When issuing a preferred security, a corporation has the option of paying out a predetermined dividend to shareholders, or reinvesting the funds into the company.

Preferred securities are issued by corporations, however, they are not issued directly by corporations. Instead, they are issued by trusts that are set up for the sole purpose of issuing preferred securities.

The impact of preferred securities on financial statements depends largely on how they are accounted for. When a trust issues preferred securities, they typically hold them in an internal account. This internal account is separate from a brokerage firm's customer account.

Companies issue preferred securities to equity trust managers, or to brokerage houses that specialize in preferred securities. The brokerage house then holds the preferred securities in a brokerage customer account.

Preferred securities are made attractive to investors through the payment of a high dividend. This high dividend attracts investors to preferred securities, which boosts the share price.

The preferred securities market is large, with approximately $2.6 trillion worth outstanding preferred securities. This accounts for approximately 4% of all debt issued in the U.S.