In the context of UITFs, what does the term 'exposure limit' imply?

The term 'exposure limit' in the context of UITFs refers to the maximum investment a fund can make in a single entity. This concept is crucial for managing risk within the fund to ensure that no single investment overly influences the overall performance or stability of the fund. By setting such limits, UITFs can diversify their portfolios more effectively, reducing potential volatility associated with the performance of individual assets. Diversification is a fundamental principle in investment management, aimed at mitigating risk while striving for a balanced return.

The other options do not accurately reflect the concept of exposure limits. The fees a fund charges, the reserved percentage for future claims, and the number of investors involved are all separate considerations related to fund management, but they do not define exposure limits in terms of investment constraints in UITFs.