Open-ended investment companies

An open-ended investment company (OEIC) is a company that manages an investment fund. This new corporate structure for funds came into being in 1997 and is similar to the structures used on the continent and in the US.

As it is a company, an OEIC issues shares in the same way as other companies. Unlike a public company however, the OEIC's share price is based on the value of the company's investments and is independent of market trends. OEIC shares can't be bought on a stock exchange but can be bought direct from the company or through a stockbroker.

An OEIC is an open-ended fund, meaning that shares are issued and cancelled as investors make and withdraw their investments.

Charges

Unlike units in a unit trust there is no differential or spread between the buy and sell prices of shares in an OEIC. This does not mean, however, that there are no charges to pay. You still have to pay management charges and advisor commissions but they are independent of the share price. The OEIC therefore provides a more transparent charging system.

It's important to look at all the charges before you decide which OEIC to buy. Even though the charges are independent of the share price they should be included in your investment performance evaluation.