BOND FUND – (1) A colloquial term for a municipal securities investment company. The investment company holds a diversified portfolio of municipal securities and units or shares in the investment company are sold to investors. There are two basic types of bond funds:
Managed Fund – A fund in which investors own “shares” of a portfolio of municipal securities. An investment advisor actively manages the portfolio in line with the set investment policy. Managed funds can be “open end” funds (i.e., they offer new shares to the public continuously) or “closed end” funds (i.e., with a fixed number of shares at any given time). Managed funds may maintain portfolios of specialized types of municipal securities (e.g., short-term securities or higher yielding long-term securities).
Unit Investment Trust or U.I.T. – A fixed portfolio of municipal securities sold to investors in trust “units” that represents fractional undivided ownership interests in the portfolio. The same securities are held in the portfolio until maturity or redemption. A U.I.T. is a “closed end” fund (i.e., with a fixed number of units available to investors).