Guide: Fund Investing

What are OEICs

Open Ended Investment Companies (OEIC's) are the modern equivalent of unit trusts. Essentially they are a cross between Unit Trusts and Investment Trusts, retaining the open-ended nature of unit trusts, but having a company structure and dealing in shares rather than units.

OEIC's are collective investments which enable individuals to pool their money into a fund which is then invested in a wide spread of real assets.

As their name implies OEIC's are 'open-ended' which means the investment managers may create or reduce the number of shares in line with supply and demand.

An OEIC has a single price, both for buying and selling shares in the fund.

OEIC's have a corporate structure and so are not based on trust law.

OEIC's offer investors the potential to achieve capital gains, which exceed what is usually possible in the Building Society, however they do involve taking a degree of added risk.

Some of this risk may however have been minimised because when you put your money into OEIC you are effectively buying a small quantity of shares in several companies, which the fund manager decides.

Effectively OEIC's are a way of spreading risk across a larger number of ordinary shares than might otherwise be possible.

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