What is an Open Ended Investment
Company (OEIC)?
This is an open-ended collective investment of pooled investor money that can issue an unlimited number of shares. The funds are managed by a professional investment manager. There are lots of different strategies and risk levels to choose from, and they can invest in one or more different asset classes.
You can invest in or redeem cash from open-ended funds at any time. Fund managers create shares or units for new investors and cancel them when they are redeemed. This means that the size of the fund can increase and decrease depending on investor demand – they are open to subscriptions and redemptions. The price an investor pays is based upon the actual value of the underlying assets (called the ‘net asset value’ or NAV).
Advantages of OEICs
| • Growth potential from investment diversity | • Managed by an experienced fund manager |
| • Ability to make lump sum and/or regular contributions | • Suitable for a range of risk attitudes |
| • Ability to sell shares at any time | • Uncapped investment amount |
| • Ability to alter fund choice | • Benefit from money being pooled with other investors |
| • Some investment growth can be offset against Capital Gains Tax allowance | • Can be jointly owned |
| • Income tax exemption for dividend income is available | • A personal savings allowance may be available, so growth may be free from income tax within certain limits |
Disadvantages of OEICs
| • Investments can go down as well as up depending on market circumstances | • Potential income Capital Gains Tax liability | • Potential negative impact of inflation |