StudyingRES5

Switch exam

Financial advisory

Capital markets products

CM-SIPSpecified Investment Products: Derivatives & Collective Investment Schemes M8Collective Investment Schemes M8ACollective Investment Schemes II CM-EIPExcluded Investment Products: Securities, Collective Investment Schemes & Foreign Exchange

Insurance

M9Life Insurance & Investment-Linked Policies M9AStructured Products & Structured ILPs HIHealth Insurance PGIPersonal General Insurance CGICommercial General Insurance BCPBasic Insurance Concepts & Principles

Securities & derivatives dealers (IBF)

RES 1ASecurities Exchange Dealers RES 1BSecurities Dealers of Non-Exchange Members RES 2BDerivatives Dealers of Non-Exchange Members RES 2ADerivatives Exchange Dealers RES 12BSecurities & Derivatives Dealers of Non-Exchange Members

← All study notes

M8 — Collective Investment Schemes I

Structure & Parties to a Fund

A unit trust pools investors' money into a single fund whose parties have separate, defined roles: the manager runs the investment strategy, the independent trustee holds the assets and safeguards unitholders, and support parties (custodian, registrar) service the fund — all governed by a trust deed and kept at arm's length so no one party both controls and holds the money.

8 sections~4 min read

Must-know for the exam

A unit trust pools investors' money; unitholders hold units representing a proportionate BENEFICIAL interest in the fund.
Core safeguard = SEPARATION of functions: the manager decides investments; an INDEPENDENT trustee holds the assets and oversees the manager.
The trustee is the LEGAL owner of the fund's assets; unitholders are the BENEFICIAL owners; the manager has no legal title and cannot access the assets directly.
Manager duties: run the investment strategy within the mandate, value the fund/NAV, create and cancel units, and act in unitholders' best interests; paid an annual management fee (% of assets).
Trustee is INDEPENDENT of the manager: it holds/safeguards assets, monitors the manager's compliance with the trust deed and limits, and protects unitholders.
The custodian provides SAFEKEEPING of cash and securities and settles trades; the trustee may act as custodian or appoint one (and sub-custodians abroad) while remaining responsible for oversight.
The registrar maintains the REGISTER OF UNITHOLDERS — the definitive record of ownership — and processes issues, redemptions, transfers and distributions.
Unitholders' liability is generally LIMITED to the amount invested; they do not manage the fund and rely on the manager's skill and the trustee's oversight.
The TRUST DEED is the fund's constituting document, made between manager and trustee; it sets out unitholders' rights, the duties of manager and trustee, investment policy, fees, valuation and winding-up.
The trust deed governs the fund; the PROSPECTUS discloses information to prospective investors — the two are distinct documents.
Manager and trustee must deal at ARM'S LENGTH and be independent of each other, so the trustee's oversight has real force.
SEGREGATION OF ASSETS: fund assets are held separately from the manager's own assets, so on the manager's insolvency they are ring-fenced from the manager's creditors and remain the unitholders'.
In Singapore, authorised (local) and recognised (foreign) retail schemes must comply with the Code on Collective Investment Schemes and the Securities and Futures Act (SFA), which enshrine these investor-protection safeguards.

The trust structure at a glance

Most retail funds in Singapore are constituted as UNIT TRUSTS. A unit trust is a legal arrangement in which investors' money is pooled into a fund, and each investor holds UNITS representing a proportionate beneficial interest in that pool.

The structure deliberately SEPARATES the two core functions of running a fund. One party decides how the money is invested (the MANAGER); a different, independent party holds the assets and oversees the manager on behalf of investors (the TRUSTEE). This separation of management from custody is the central safeguard in the trust model.

The relationship is a trust: the trustee is the LEGAL OWNER of the fund's assets, while the unitholders are the BENEFICIAL OWNERS. The manager has no legal title to the assets and cannot access them directly — it can only instruct the trustee within the limits set by the fund's constitution.

The main parties are therefore: the fund manager, the trustee, the custodian, the registrar and the unitholders. Their respective duties are defined in the TRUST DEED.

The fund manager

The MANAGER (fund management company) is responsible for the day-to-day operation and investment of the fund. Its core role is to make investment decisions in line with the fund's stated objective and investment policy.

Typical duties of the manager:

•Formulate and execute the investment strategy — selecting, buying and selling assets within the mandate.
•Ensure the fund is managed within its stated objective, permitted investments and any investment/borrowing limits.
•Value the fund and calculate the net asset value (NAV) and the unit price for dealing.
•Issue (create) and cancel (redeem) units as investors subscribe and redeem.
•Market the fund and produce the prospectus/product highlights sheet and periodic reports.
•Act honestly, with due care and skill, and in the best interests of unitholders.

The manager is typically remunerated by an ANNUAL MANAGEMENT FEE charged as a percentage of the fund's assets, and it must be a licensed/regulated fund management entity.

Premium

Every note. Every question. One pass.

6 more sections of this note are part of Premium.

Every section of every study note
13,000+ questions across every CMFAS module
Full timed mock exams
A worked explanation on every question
Your full mistake bank and weak-area review

Unlock with Premium

From ≈$14.83/mo on the 6-month pass

Traps that cost marks

Confusing legal ownership (trustee) with beneficial ownership (unitholders), or assuming the manager owns the assets it invests.
Swapping the legal/beneficial roles, or treating unitholders as lenders rather than owners of a beneficial interest.
Believing investor protection comes from guarantees or insurance rather than the structural separation of duties.
Attributing custody or record-keeping functions to the manager, which only directs strategy and cannot hold the assets.
Thinking the trustee makes investment decisions or shares the manager's fee, rather than acting as an independent check.
Confusing safekeeping/settlement (custodian) with investment selection (manager) or ownership records (registrar).
Confusing the ownership register (registrar) with the constituting document (trust deed) or the manager's NAV work.
Assuming unitholders sign the deed; they are bound by it but it is executed between manager and trustee.

Ready to test yourself?

Drill exam questions on Structure & Parties to a Fund and lock it in, or sit the free CMFAS mock exam with no sign-up.

Practise this topic →

Exam-style questions

In Singapore, retail collective investment schemes (both authorised local and recognised foreign schemes) must comply with which of the following?Answer explained →The trustee's duty to 'hold the manager to account' primarily serves toAnswer explained →A unit trust can best be described as a legal arrangement in whichAnswer explained →

← PreviousTypes of CIS & Fund Structures Next →Pricing, Valuation & Dealing