Widely Held Fixed Investment Trust (WHFIT)

A widely held fixed investment trust (WHFIT) is a type of unit investment trust (UIT) that includes at least one third‑party interest holder (a middleman). Like other UITs, a WHFIT holds a fixed portfolio of assets—such as stocks, bonds, or mortgages—and distributes income (interest or dividends) to investors proportionate to their unit holdings. WHFITs have a specified termination date on which the trust sells its assets and distributes the proceeds.

Key takeaways

A WHFIT is a UIT with at least one third‑party (middleman) holding an interest in the trust.
Investors receive periodic income from the trust’s underlying assets and a final distribution at termination.
WHFITs are generally treated as pass‑through (flow‑through) entities for tax purposes; income passes to investors.
Common WHFIT types include fixed portfolios of bonds, equities, or mortgage assets (widely held mortgage trusts).

How a WHFIT works

Grantors (initial investors) pool funds to purchase a fixed portfolio of assets.
A trustee (often a broker or financial institution) holds and manages the assets without actively trading the portfolio.
A middleman (broker or custodian) may hold unit shares on behalf of beneficial owners, allowing for direct or indirect interests.
Trust interest holders receive income distributions based on their proportional ownership. At the trust’s termination date the underlying assets are sold and proceeds distributed to holders.

Parties involved

Grantors: those who fund the initial purchase of trust assets.
Trustee: custodian who holds and administers the assets.
Middleman: intermediary that may hold units in nominee name for clients.
Trust interest holders: investors entitled to the income and principal distributions.

Tax treatment

WHFITs are typically treated as pass‑through entities for U.S. federal income tax: the trust itself generally does not pay tax on earnings.
Investors receive tax reporting (e.g., Form 1099) showing income they must report on their returns.
Tax consequences depend on the composition of trust income (interest, dividends, capital gains) and investors’ individual tax situations.

Widely held mortgage trusts and REMICs

A widely held mortgage trust holds pools of mortgages or mortgage‑related debt; investors earn returns from interest collected on those mortgages.
Government‑sponsored entities and agencies (e.g., Freddie Mac, Fannie Mae, Ginnie Mae) periodically issue such trusts.
Related vehicles include real estate mortgage investment conduits (REMICs), which pool mortgages and issue mortgage‑backed securities to investors.

WHFITs vs. mutual funds and other investment companies

The SEC classifies UITs (including WHFITs), mutual funds, and closed‑end funds as distinct investment company types.
Mutual funds are open‑ended and actively managed: portfolio managers can buy and sell securities to meet investment objectives and benchmarks.
WHFITs offer a static portfolio with a set termination date—no active trading—making them suitable for buy‑and‑hold income strategies (e.g., bond income).
Closed‑end funds issue a fixed number of shares but trade on exchanges; UITs (including WHFITs) provide units representing interests in the fixed portfolio.

When investors might choose a WHFIT

Seeking predictable income from a fixed set of bonds or mortgages.
Wanting a diversified, professionally assembled portfolio without active management.
Preferring a defined termination date and known disposition schedule for principal.

Risks and considerations

Limited flexibility: the fixed portfolio is not actively managed in response to market changes.
Interest rate and credit risk tied to the underlying assets.
Tax treatment and reporting can vary based on trust structure and the mix of income types.
Liquidity may be lower than for open‑ended mutual funds; units are often bought and sold through brokers at prevailing prices.

Summary

A WHFIT is a static, pass‑through investment vehicle that offers investors income from a fixed portfolio—often bonds or mortgages—with a set termination date. It is suitable for investors seeking predictable income and a hands‑off, diversified exposure to a specified pool of assets, but it carries risks related to interest rates, credit quality, and limited portfolio flexibility.