What is the exposure limit of UITFs to a single person or entity?

In Unit Investment Trust Funds (UITFs), the exposure limit to a single person or entity is set at 10% of the UITF's market value. This limit is crucial for maintaining diversification within the fund's investment portfolio, which helps to mitigate risk. By restricting exposure to any single entity or individual to this percentage, the UITF can better insulate itself from significant loss that could arise if that particular investment were to perform poorly.

This limitation ensures that the fund does not become overly reliant on the performance of a small number of investments, which can lead to increased volatility and risk. Such a strategy is aligned with the principles of prudent investment management, which advocate for diversification across a wide array of assets to build a resilient portfolio.

In the context of other choices, the percentages proposed (5%, 15%, and 20%) do not reflect the standard regulations governing UITFs, which emphasize the importance of a balanced and diversified approach to investing. Thus, the 10% exposure limit allows UITFs to operate within a framework that promotes stability and investor protection.