What is a trust: A guide for short-term investors looking to understand asset management tools

When it comes to advanced investing, many people often confuse Trust with REIT and mutual funds. All three seem similar, but in reality, they are quite different. Today, we will break down how to truly understand them.

Trust (What is a Trust)

A Trust is a legal tool used to manage and oversee assets. It involves a trustworthy person called a (Trustee) who takes ownership of assets from the owner and manages them to generate income, then distributes the benefits to the (Beneficiary) as specified in the agreement.

The key point of a Trust is that the ###assets being managed### can be diverse—such as funds, land, stocks, bonds, or even businesses and art—as long as they can generate income.

To clarify: a Trust is an asset management system where experts handle the assets so that the owner can sit back and receive income peacefully.

( Why is a Trust important: benefits investors should know

1. Distribute benefits without transferring assets directly Trust allows you to remain the legal owner but can send income to others as you wish. Originally used for estate management, now expanded to investment purposes.

2. Controlled according to the owner’s intent The Trust agreement must clearly specify what the Trustee must do, ensuring management aligns with your wishes.

3. May have tax advantages Since a Trust does not involve a direct transfer of assets but only benefits, tax regulations differ depending on each country’s laws.

4. Flexible Setting up a Trust is just a contractual agreement between individuals; it does not require registration or approval like a fund, making changes easier.

) Who are the key roles in a Trust

Settlor (Founder) — The original asset owner who signs the Trust agreement.

Trustee (Manager) — The person entrusted to oversee and manage the assets. They are not the owner but can charge management fees.

Beneficiary (Recipient of Benefits) — The person who receives income from the Trust as per the agreement. They have the right to claim if the Trustee breaches or shows misconduct.

Types of Trust available in the market

1. Active Trust for management and investment (Active Trust) — Established to generate prosperous yields, such as Trusts for institutional investors or REITs investing in real estate.

2. Passive Trust for holding or debt repayment (Passive Trust) — Set up to oversee assets like ESOP (for employees), EJIP ###joint investment projects with employees###, or Reserve Accounts for bond repayment.

There are also many other types of Trusts, such as asset protection Trusts, charitable Trusts, estate management Trusts, marriage Trusts, and Trusts for other special purposes.

Serious comparison: Trust vs REIT vs mutual funds

( Are Trusts different from REITs?

A REIT, or Real Estate Investment Trust, is a Trust that invests specifically in real estate. General Trusts can invest in a broader range of assets.

However, in terms of formation and management, both are similar: they are not legal entities and are established through a Trust agreement. The main difference lies in the investment scope—what they are allowed to invest in.

) Trust vs Mutual Fund )How are they different?

A mutual fund is a structure that pools money from investors to invest according to the fund’s objectives, then distributes profits as dividends or unit value.

The two main differences are:

1( Legal status — Funds are legal entities )with a distributor), whereas Trusts are not.

2( Formation process — Funds must register and obtain approval from regulatory authorities, which takes more time, while Trusts are simply formed through a contract.

How can ordinary investors in Thailand invest in Trusts?

The Securities and Exchange Commission )SEC( permits only two types of Trusts in the Thai market, and they are used solely for fundraising in the capital markets.

The Trust types suitable for general investors: Almost all in Thailand are REITs )Real Estate Trusts(, mainly because they clearly specify value and risk. Even beginners can invest.

Clear summary

A Trust is not as complicated as it seems. It’s merely a system where experts manage assets for owners to generate income.

When a Trust invests in real estate, it is called a REIT. An important difference from other REITs is that Trusts are more flexible and easier to adapt.

If you want to invest in large assets but lack sufficient capital, REITs or Trusts are good options. Once the Trustee manages to generate benefits, they are paid out as dividends to unit holders )which is you.