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What is an OEIC?

An Open Ended Investment Company (OEIC) is similar to a unit trust in that it is an open ended investment. This means that the fund will grow or shrink depending on the number of investors. There are however a few differences. As the name would suggest, an OEIC is set up as a company, rather than a trust. The funds in an OEIC are managed by an authorised company director and not a fund manager.

Types of funds available in OEICs

Different funds carry different risks. Every OEIC fund will have a specific aim. Knowing a funds investment strategy enables you to invest according to your attitude to risk. A fund that invests in large UK companies would be considered to carry a lower risk than a fund investing in smaller UK companies or emerging markets.

What is The Difference between an OEIC and a Unit Trust?

As well as the management structure there are other differences between a Unit Trust and an OEIC. Unit trusts have 2 prices, the bid price and the offer price. You buy units at the offer price and sell units at the bid price. OEICs are simpler in that there is one single price for the shares, which is linked directly to the value of the underlying investments. Unit Trusts are also more complex legally. OEICs and Unit Trusts have similar charging structures, but with OEICs any initial charge is shown as a separate item on your transaction statement. This makes it easier to understand the charging structure for an OEIC.