Widely Held Fixed Investment Trust (WHFIT) Explained: 2025 Insights & Pricing Guide

Julia Kagan, a seasoned financial journalist and former senior editor at Investopedia, explains the fundamentals of WHFITs.

What is a Widely Held Fixed Investment Trust (WHFIT)?

A Widely Held Fixed Investment Trust (WHFIT) is a specialized type of unit investment trust (UIT) that involves at least one third-party interest holder. Investors who buy shares in a WHFIT receive regular income from dividends or interest generated by the trust's fixed portfolio of stocks, bonds, or mortgage assets.

Key Highlights

• WHFITs include a third-party custodian who holds the unit shares on behalf of investors.
• This custodian role distinguishes WHFITs from typical UITs, though both operate similarly from an investor standpoint.
• WHFIT portfolios are fixed and may include stocks, bonds, or real estate mortgage investments.

How Widely Held Fixed Investment Trusts Work

WHFITs require a middleman or custodian to hold shares, enabling investors to have either direct or indirect ownership interests. These trusts are categorized as grantor’s trusts because investors pool capital to purchase the trust's assets. Income from these assets is distributed proportionally to shareholders.

Tax-wise, WHFITs are pass-through entities, meaning the trust itself does not pay taxes. Instead, investors receive tax documents such as Form 1099 and report income accordingly.

• Grantors: Investors pooling funds.
• Trustee: Often a broker or financial institution managing assets.
• Middleman: Custodian holding shares for investors.
• Trust Interest Holders: Investors entitled to income from the trust.

Comparison with Other Investment Vehicles

The U.S. Securities and Exchange Commission (SEC) classifies UITs, including WHFITs, alongside mutual funds and closed-end funds. Unlike mutual funds, WHFITs maintain a fixed portfolio and have a set termination date where assets are liquidated and proceeds distributed.

The U.S. Internal Revenue Service (IRS) treats these trusts as flow-through entities, so investors are responsible for taxes on income earned.

Widely Held Mortgage Trusts

A popular variant of WHFITs is the widely held mortgage trust, which invests in pools of mortgages or real estate-related debt. Income is generated from mortgage interest payments. Major federal agencies like Freddie Mac, Fannie Mae, and Ginnie Mae frequently issue these trusts.

Relatedly, Real Estate Mortgage Investment Conduits (REMICs) bundle mortgage loans and issue mortgage-backed securities, providing investors with interests in commercial and residential mortgages.

UITs vs. Mutual Funds: Key Differences

Mutual funds are actively managed and open-ended, allowing portfolio managers to trade assets aiming to outperform benchmarks like the S&P 500. In contrast, UITs and WHFITs have fixed portfolios that are held until a predetermined end date, making them suitable for investors seeking steady income from bonds or fixed assets.

Investors looking for diversified bond portfolios with predictable income often prefer UITs or WHFITs, avoiding the complexities of managing individual bond holdings.

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