What is an OEIC?
Open-Ended Investment Companies
(OEICs) are collective investment schemes. They
allow individual investors to enjoy the benefits usually
only available to larger institutional investors, by pooling
their investments together in a common fund.
OEICs are incorporated companies which issue shares
which investors can buy and sell. The shares in an OEIC
are traded on a single pricing basis, unlike unit trusts
which have a bid-offer spread.
An alternative name used to describe an OEIC is an
Investment Company with Variable Capital (ICVC).
This type of structure is widely used in Europe and
the adoption of OEICs in the UK opens these foreign
markets to UK companies. Unit trusts on the other hand,
with their complex trust deeds and bid-offer pricing,
have never found much favour amongst foreign investors.
Within an OEIC you can invest in a range of funds,
investing in different markets such as equities, government
stocks, bonds and cash, like unit trusts.
An OEIC will diversify its investments and therefore
spread the risk to an extent that would not normally
be possible for an individual making direct
investments. The level of risk associated with an OEIC
depends on what you invest into and certain share classes
will fall into the low or high risk categories. OEICs
should be viewed as a medium to long term investment.
Whilst a unit trust is limited to the creation of income
and accumulation units, an OEIC allows the creation
of different classes of shares to provide for different
charging structures and denominations in different currencies.
OEICs are able to operate as “umbrella”
structures with several funds within one company. This
enables funds to be structured more efficiently and
for
investors to customise and control their investments
more easily. Shareholders can switch between funds without
triggering the entry or exit charges which would arise
if the investor wanted to move from one OEIC to another.
The value of an investment is not guaranteed and
can go up and down depending on investment performance.
You could get back less than you have paid in. |
