Understanding Trust: An Investment Tool Often Misunderstood

If you are a beginner investor, you may have heard the terms “Trust” or “ทรัสต์” floating around, but you might still be unclear about how it differs from REITs or mutual funds, and most importantly—whether you can actually invest in it.

A common misconception is thinking that a Trust is the same as a REIT or a fund. In reality, the relationship between them is more complex.

What is a Trust: A Simplified Definition

At its simplest concept, Trust is a trust agreement—the trustee manages assets received from the owner and operates them to generate benefits, then distributes the returns to the beneficiaries.

The assets managed can be of various types—capital, real estate, stocks, bonds, businesses, or even other income-generating assets.

To visualize simply: Trust = an asset management unit designed to make assets circulate and generate results, then send the money back to the asset owner and stakeholders.

Why Trust is a Good Choice: 5 Main Advantages

1. Benefits without transferring ownership
Since ancient times, Trusts have been used to manage estates, allowing benefits to be derived from assets without transferring actual ownership.

2. Clear intent in management
Trusts must specify clear intentions on how assets are to be managed, ensuring trustees follow these instructions strictly.

3. Tax advantages
Because a Trust is not considered a transfer of ownership, many tax authorities offer certain tax benefits.

4. Flexible management options
The settlor can choose whether the Trust is revocable or irrevocable. If revocable, assets can be managed anew if preferences change.

5. Professional management assistance
Individuals who are ill or unable to manage their finances can delegate to experts for management.

Types of Trusts: Not Just Active vs. Passive

Besides classification by revocability (Revocable vs. Irrevocable), there are other types such as:

• Asset Protection Trust (เพื่อป้องกันทรัพย์สิน)
• Blind Trust (ผู้ตั้งไม่รู้ว่าทรัพย์สินบริหารอย่างไร)
• Charitable Trust (เพื่อการกุศล)
• Generation-Skipping Trust (ส่งมรดกข้ามรุ่น)
• Land/Real Estate Trust (บริหารอสังหาริมทรัพย์)
• Marital Trust (บริหารทรัพย์สินสมรส)

In Thailand, most are Active Trusts (บริหารให้เกิดผลประโยชน์), such as II/HNW Trust Funds for large investors, and REITs for real estate.

Trust vs REIT: Key Similarities and Differences

Similarities:

• Both are not legal entities
• Both are established via contracts
• Both have a middle management entity

Differences:
REIT = A Trust that manages only real estate, which is a specific type of Trust within the broader Trust category.

Therefore, REIT is a Trust, but not all Trusts are REITs, because Trusts can manage a variety of assets.

Trust vs Mutual Funds: The Issues to Clarify

Differences:

• Trust is not a legal entity; it is established by a contract.
• Mutual funds are legal entities that require registration and approval from authorities.

In practice, mutual funds tend to be more regulated, while Trusts offer greater flexibility and easier adaptation.

Trusts Thai Investors Can Invest In

In Thailand, the Securities and Exchange Commission permits Trusts only for fundraising in the stock market, divided into two types:

1. Active Trusts

• II/HNW Trust Funds (for institutional/large investors)
• REIT (investing in real estate)

2. Passive Trusts

• ESOP (Employee Stock Ownership Plan Trust)
• EJIP (Employer-Employee Investment Trust)
• Reserve Account Trust (for debt reserve payments)

Currently, REITs are the most accessible Trust option for general investors because their assets are easy to verify, and even beginners can buy and sell them.

Now You Know

Trust is an ancient asset management tool born from trust, originally used for estate management but now adaptable to various asset types.

When a Trust manages only real estate, it is called a REIT, which is the most accessible option for Thai investors.

So, if asked, “What is a Trust and how is it different from REIT?” the answer is: REIT is a type of Trust, but Trusts are broader, more flexible, and applicable in more diverse situations.

For those wanting to invest in large assets without significant capital, REITs are a worthwhile option to consider.