What I𝓰s an Open Ended Investment Company (OEIC)?

An open-ended investment company (OEIC) is a type of investment fund domiciled in the United Kingdom that is structured as a company in its own right to invest in stocks and other securities. OEIC shares do not trade on the London Stock Exchange.

The price of the shares is based largely on the underlying assets of the fund. These funds can mix different types of investment strategies such as income and growth, 澳洲幸运5官方开奖结果体彩网:small cap and 澳洲幸运5官方开奖结果体彩网:large cap, and can constant𝄹ly adjust their inves♔tment criteria and fund size.

OEICs are called "open-ended" because they can create new shares to meet investor demand. Also, the fund will cancel the shares of investors who exit the fund. OEICs are regulated by the Financial Conduct Authority (FCA), which means services such as the Financial Ombudsman are available to investors if problems arise.

Understanding 💫an Open Ended Investment Company (OEIC)

An open-ended investment company pools investors’ money and spreads it across a wide range of investments, such as equities or 澳洲幸运5官方开奖结果体彩网:fixed-interest securities. This diversification helps reduce the risk of losing an investor’s principal. OEIC funds offer the potential for growth or income. They usual🧸ly function as a medium to lo♈ng-term investment, held for five to ten years or longer.

Any U.K. investor, 18 years or older, may invest in a wide range of funds managed by industry experts. As in the United States, there are various levels of risk available for capital growth, income generation, or a combination of both. Shareꦦholders may invest for themselves or their children. When children turn 18 years old, they hold the investment in their own right.

Charges for OEIC Shares

As of 2021, investors pay an initial charge of between 0% to 5% when buying new shares. This type of front-end load lowers the amount of money going into the fund to purchase shares. In addition, there is an annual management charge (AMC) of around 1% to 1.5% of the value of an investor’s shares. The AMC covers the fund manager's services. Funds that are not actively managed, such as index trackers, have much lower fees.

Most funds quote a 澳洲幸运5官方开奖结果体彩网:total expense ratio (TER) or an ongoing charges figure (OCF). Each charge includes the AMC and other expﷺenses used for comparing different products. The TER and OCF do not include dealer charges that can add significantly to annual costs if the fund has a high turnover rate.

There may also be an exit charge for selling shares, based on a percentage of the total value ofꦫ the sale. However, many OEICs do not charge exit fees.

Investing in OEICs

OEICs are useful for investors who do not have the time, interest, or expertise to actively manage their investments. Investors may invest a single paꦐyment or monthly payments with minimum amounts depending on the fund. Also, access to funds online or over the phone is generally easy. Further, shareholders may pay a fee when moving between funds.

OEIC are not tax-advantaged; so, interest and dividends are taxable, and selling shares may incur a capital gains tax. Of course, the amounts involved must exceed dividend and capital gains tax allowances. Also, shareholders may hold OEICs tax-free in an 澳洲幸运5官方开奖结果体彩网:Individual Savings Account (ISA) or other U.K. pension plan.

However, investment values and resulting income are not guaranteed and may increase or decrease, depending on investment performance and currency exchange rates for funds investing in foreign markets. Therefore, a shareholder may not get back theඣ original amount invested.

U.S. residents may not hold shares in OEICs. U.S. shareho♎lders must have the OEIC sell their shares or transfer their investments to U.K. residents.

OEICs vs. Unit Trusts

In the United Kingdom, 澳洲幸运5官方开奖结果体彩网:unit trusts (UTs) and OEICs are𒁏 the two most common types of investment funds, and they al🌺so have much in common.

Like OEICs, unit꧒ trusts consist of a manager who buys stocks and bonds for holders of a fund, in an open-end🔥ed format. The two mainly differ in the way they are priced. Unit trusts will have two prices:

1. The bid price—the price per unit received for each unit sold back to the fund
2. The offer price—the price to purchase each unit of the fund

OEICs have only one price per day, based on the 澳洲幸运5官方开奖结果体彩网:net asset value (NAV) of the underlying assets of the fund. OIECs tend to have lower fees than UTs because they have a simpler structure. Many investment companies have been converting unit trusts into OEICs for this reason.

Real-World Example of OEICs

British OEICs are comparable to American mutual funds, and many U.S. investment companies that do business in the U.K. offer them. One such is Fidelity International, an overseas division of Fidelity Investments. In July 2018, the division announced it was instituting variable management fees for five UK-domiciled OEICs, including the Fidelity Special Situations, Fidelity European, Fidelity Asian Dividend, Fidelity Global Special Situations, and Fidelity American funds.

The change effectively reduced the base AMC of the funds by 10%.

Correction-Oct. 13, 2022: This article previously misstated that shares of OEICs trade on the Lon🔜don St♔ock Exchange.