Unit Trusts and Treasury Bills are two different ways Ugandans can put money to work without buying individual company shares.
But they work very differently.
Treasury Bills are short-term government securities with fixed maturity periods.
Unit Trusts pool investors’ money into professionally managed funds that may invest in Treasury Bills, Treasury Bonds, fixed deposits, corporate debt, shares or other assets depending on the fund.
The better option depends on what you are trying to achieve, how long you can invest and how quickly you may need access to your money.
Here is how they compare.
What Are Treasury Bills?
Treasury Bills are short-term government securities issued by the Government of Uganda through the Bank of Uganda.
They are available in three maturities:
- 91 days
- 182 days
- 364 days
Unlike Treasury Bonds, Treasury Bills do not pay coupon interest.
Instead, they are generally purchased at a discount to their face value and the investor receives the face value at maturity.
For example, an investor might pay less than UGX 1,000,000 for a Treasury Bill with a face value of UGX 1,000,000.
The difference between the purchase price and the amount received at maturity represents the investor’s gross return before applicable taxes.
You can see the latest auction yields on our Treasury Bill Rates in Uganda.
What Are Unit Trusts?
A Unit Trust is a pooled investment managed by a professional fund manager.
Money from multiple investors is combined and invested according to the strategy of the particular fund.
Depending on the Unit Trust, the portfolio may contain:
- Treasury Bills
- Treasury Bonds
- Fixed deposits
- Corporate debt
- Shares
- Cash and other permitted investments
Investors own units in the fund rather than directly owning each underlying investment.
This means two Unit Trusts can behave very differently.
A Money Market Fund investing mainly in short-term fixed-income instruments will have a different risk, return and liquidity profile from an equity-oriented fund investing mainly in shares.
Through Level Africa, investors can access Unit Trusts managed by established fund managers.
Unit Trusts vs Treasury Bills: Key Differences
| Feature | Treasury Bills | Unit Trusts |
|---|---|---|
| Structure | Government security | Pooled investment fund |
| Issuer/Manager | Government of Uganda through Bank of Uganda | Licensed fund manager |
| Investment period | 91, 182 or 364 days | Depends on the fund |
| How returns are earned | Difference between purchase price and face value at maturity | Income and/or changes in the value of the fund’s investments |
| Returns | Determined by the purchase price/yield | Variable depending on fund performance |
| Diversification | One government security | Fund may hold multiple investments |
| Professional management | Not a managed portfolio | Professionally managed |
| Access to money | Primarily structured around maturity; secondary-market options may exist | Redemption terms depend on the fund |
| Minimum investment | Depends on the investment channel and auction process | Depends on the particular fund |
| Risk | Government credit and market/interest-rate considerations | Depends on the assets and strategy of the fund |
Which Gives You Better Access to Your Money?
This is one of the biggest differences between the two.
Treasury Bills have defined maturity dates.
If you buy a 364-day Treasury Bill, for example, the investment is structured to mature after 364 days.
Unit Trusts generally allow investors to request redemptions according to the terms of the particular fund.
The processing period can vary between funds.
This can make certain Unit Trusts, particularly Money Market Funds, useful for investors who value relatively easier access to their money.
However, you should always check the redemption terms before investing rather than assuming every Unit Trust provides immediate access.
Which Has Better Returns?
There is no permanent answer.
Treasury Bill yields change from auction to auction.
Unit Trust returns also change depending on the fund’s portfolio, market conditions, interest rates, fees and investment strategy.
A Money Market Fund may itself invest part of its portfolio in Treasury Bills.
That means the comparison is not always as simple as choosing between two completely unrelated investments.
The fund manager may be using Treasury Bills alongside other investments to generate returns for Unit Trust investors.
When comparing returns, make sure you understand:
- The period over which the return is measured
- Whether the figure is annualised
- Whether fees have already been deducted
- Whether tax has been accounted for
- Whether the return is historical or expected
- Whether the investment return is fixed or variable
Do not choose an investment solely because one percentage appears higher than another.
Which Is Safer?
Treasury Bills are obligations of the Government of Uganda and are generally considered to carry relatively low credit risk compared with many private-sector investments.
Unit Trust risk depends on what the fund actually owns.
For example, a Money Market Fund primarily investing in short-term government securities, deposits and high-quality fixed-income instruments may have a different risk profile from an equity fund investing in listed companies.
Unit Trusts are therefore not one single risk category.
Before investing, look at the fund’s underlying investments, stated risk level, liquidity and investment strategy.
Which Is Better for Short-Term Goals?
Both can potentially serve shorter-term goals, but in different ways.
Treasury Bills have clearly defined maturity periods of 91, 182 and 364 days.
That can be useful when you know approximately when you will need your money.
For example, you may have money today that you expect to use several months from now.
A suitable Treasury Bill maturity can provide a defined investment period.
Certain Unit Trusts, particularly Money Market Funds, can also be considered for shorter-term goals where the investor values flexibility and the ability to request a redemption according to the fund’s terms.
The better fit depends on the timing of your goal and how much flexibility you need.
Which Is Better for Regular Investing?
Unit Trusts can be particularly useful for investors who want to add money regularly.
Instead of waiting until you have a large amount, you may be able to make additional investments into a fund over time, subject to its minimum investment and top-up requirements.
This can suit someone building towards a financial goal month by month.
Treasury Bills work differently because investments are tied to particular securities and maturities.
Which Offers More Diversification?
Unit Trusts generally have the advantage here.
One Unit Trust may hold many different securities.
For example, a fund could hold Treasury Bills, Treasury Bonds, fixed deposits and corporate debt simultaneously.
Your investment is therefore spread across the fund’s portfolio.
A Treasury Bill is an investment in a particular Government of Uganda security.
Diversification does not automatically make a Unit Trust better, but it changes how investment risk is distributed.
Unit Trusts vs Treasury Bills for UGX 1 Million
Suppose you have UGX 1 million that you do not need immediately.
With a Treasury Bill, you would select a maturity and invest according to the applicable purchase process. Your return would depend on the price/yield at which the Treasury Bill is purchased.
With a Unit Trust, your UGX 1 million would purchase units in a professionally managed fund. The value and returns would depend on the fund’s portfolio and performance.
The important question is therefore not simply:
Which one pays more?
It is:
What do I need this money to do?
If you know you will need the money around a particular date, a defined Treasury Bill maturity may be useful.
If you want professional management, diversification and redemption flexibility, a suitable Unit Trust may make more sense.
Can You Invest in Both?
Yes.
Treasury Bills and Unit Trusts do not have to be an either-or decision.
An investor may use different investments for different goals.
For example, someone could use a Unit Trust for money they want to build gradually while using government securities for money assigned to a particular investment period.
What matters is understanding the role each investment plays in your overall financial plan.
Important: Treasury Bills Are Not Currently Available Through Level Africa
Treasury Bills are not currently available for investment through Level Africa.
If you are researching Treasury Bills because you want short-term investing with relatively flexible access, you can explore Unit Trusts available through Level Africa, including Money Market Funds where applicable.
If you are interested specifically in Government of Uganda securities, Level Africa provides access to Treasury Bonds.
Level Africa also provides Fixed Income opportunities for investors looking for other income-focused investments.
You can compare these options based on minimum investment, investment period, potential return, liquidity and risk.
Unit Trusts vs Treasury Bills: Which Should You Choose?
Consider Treasury Bills if you:
- Specifically want a short-term Government of Uganda security
- Prefer a defined maturity of 91, 182 or 364 days
- Understand how discount pricing and Treasury Bill yields work
- Are comfortable investing through a channel that provides access to Treasury Bills
Consider a Unit Trust if you:
- Want professional fund management
- Want diversification across several investments
- Want the ability to make additional investments over time
- Value redemption flexibility subject to the fund’s terms
- Want to choose between different fund strategies and risk profiles
Neither is automatically better.
The better investment is the one whose structure fits what you need your money to achieve.
Final Thoughts
Unit Trusts and Treasury Bills can both play useful roles in managing and growing money, but they solve different problems.
Treasury Bills provide exposure to short-term Government of Uganda securities with defined maturities.
Unit Trusts provide access to professionally managed portfolios and can offer greater diversification and flexibility depending on the fund.
Before comparing headline returns, compare the investment period, liquidity, risk, minimum investment and how the return is generated.
If Unit Trusts better match what you are looking for, you can compare Unit Trust options available through Level Africa
Frequently Asked Questions
What is the main difference between Unit Trusts and Treasury Bills?
A Treasury Bill is a short-term Government of Uganda security with a maturity of 91, 182 or 364 days. A Unit Trust pools investors’ money into a professionally managed portfolio that may contain several different investments.
Are Unit Trusts safer than Treasury Bills?
Not necessarily. Treasury Bills are obligations of the Government of Uganda. The risk of a Unit Trust depends on the assets held by the particular fund and its investment strategy.
Which pays more, Unit Trusts or Treasury Bills?
It depends on prevailing Treasury Bill yields and the performance of the particular Unit Trust. Neither consistently pays more in every market environment.
Can I withdraw money from a Unit Trust before maturity?
Unit Trusts do not necessarily have a maturity date like Treasury Bills. Investors can generally request redemptions according to the particular fund’s terms and processing periods.
Can I sell a Treasury Bill before maturity?
Treasury securities may be tradable before maturity, but the price received can depend on prevailing market conditions and available market access.
Can I invest in Treasury Bills through Level Africa?
No. Treasury Bills are not currently available for investment through Level Africa.
Level Africa currently provides access to Treasury Bonds, Unit Trusts and Fixed Income investments, among other available investment products.
Can I invest in both Treasury Bills and Unit Trusts?
Yes. They can serve different purposes within a financial plan.