Product Profile
Open Ended Investment Companies (OEICs)
OEIC stands for Open Ended Investment Company. An OEIC is a pooled investment, which is broadly similar to a unit trust. Their business is investing in shares, securities and other funds on behalf of investors. OEICs can also be known as ICVCs (Investment Company with Variable Capital). They are known as ‘open-ended’ funds because each fund’s size will increase or decrease, depending on the levels of investments and redemptions at any particular time. When you invest in an OEIC, your money is pooled with that of other investors in that fund. Your holdings in an OEIC are known as ‘shares’. The price of shares is based on the underlying value of the investments your chosen fund has invested in. You will usually pay an initial charge when you invest. For an OEIC, there is usually no difference between the buying and selling price of shares – they are known as being ‘single priced’. For this reason, any initial charge is added to the OEIC single mid price.
OEICs are pooled investment vehicles where your money is combined with other peoples' to produce significant purchasing power. Your investment in an OEIC provides you with access to stockmarket investment combined with professional fund management. Investors in OEICs buy shares rather than units and these shares are quoted with a single price (no bid/offer spread).
Investors in OEICs hold shares (due to an OEIC's Corporate Structure), whereas investors in unit trusts hold units (due to the 'Trust' structure of unit trust). In contrast to a unit trust, an OEIC functions as an umbrella by holding a number of sub funds each with its own investment aims and objectives and dedicated Fund Managers.
The structure of an OEIC is like an umbrella (if you imagine the individual sub fund components as being rather like spokes joining together under the same 'roof'). Each sub fund within an OEIC has its own clear investment objectives and dedicated fund manager. Each sub fund will also offer different classes of shares in order to accommodate shareholders' different investment objectives. Subscription charges and requirements vary according to the class of shares purchased.
One of the main advantages of OEICs is that each sub fund can offer different classes of shares (each with different subscription requirements and charges) to suit a range of your investment needs.
As the sub funds invest in a number of different companies the risks associated with investing in individual stocks and shares are reduced. Also, the more companies the fund invests in, the less each company's individual performance affects the fund.
An OEIC should be considered as a medium to long term investment and at least three to five years is usually recommended. However, there is no minimum period that you must hold your investment.
OEICs charge an annual management charge which is taken directly from the funds.