Types of Funds

What Are They?

An Open Ended Investment Company ("OEIC") is a type of investment fund and collective investment vehicle that pools your money with other investors.

An OEIC is a company in its own right, so when you invest money in an OEIC you are essentially buying shares in that company. As OEICs are open-ended vehicles (unlike investment trusts), the OEIC will issue (or redeem) shares on a regular basis in response to investor demand. This will then increase or reduce the overall size of the fund accordingly.

Value of the OEIC

The OEIC fund's value is directly linked to the performance of its underlying financial assets - when their value increases, your shares grow in value too. Of course if these financial assets go down in value then so too does the value of your shares.

As the OEIC pools money from a number of investors, this larger size allows the fund manager to invest in a far greater variety of financial assets (company shares, government or corporate debt or other types of financial investments in global markets) than would be available to an individual investor. Additionally, this greater size will allow for economies of scales in relation to the cost of investing in financial assets.

How Do You Invest?

OEICs are easy to access either directly online from a fund provider or broker, or via a financial adviser. They can be held inside a tax-efficient wrapper such as an ISA or personal pension. Investors can also choose between lump sum and/or regular monthly payment into their OEIC.

Get the details you need by selecting OEICs fund from the fund filter on our wide range of OEIC funds.

What Are They?

A Unit Trust is a collective investment vehicle that pools your money with other investors.

A Unit Trust is created under a trust deed, as opposed to under company law in the case of an Open Ended Investment Company ("OEIC"), so when you invest money in a Unit Trust you purchase or sell units of the trust. As Unit Trusts are open-ended vehicles, the Unit Trust will issue (or redeem) units on a regular basis in response to investor demand. This will then increase or reduce the overall size of the fund accordingly.

Value Of The Unit Trust

The Unit Trust's value is directly linked to the performance of its underlying financial assets - when their value increases, your units grow in value too. Of course if these financial assets go down in value then so too does the value of your units.

As the Unit Trust pools money from a number of investors, this larger size allows the fund manager to invest in a far greater variety of financial assets (company shares, government or corporate debt or other types of financial investments in global markets) than would be available to an individual investor. Additionally, this greater size will allow for economies of scales in relation to the cost of investing in financial assets.

In recent years many Investment Managers (including Aberdeen Standard Investments) have converted their unit trusts into OEICs mainly for administrative and consistency reasons.

How Do You Invest?

Unit Trusts are easy to access either directly online from a fund provider or broker, or via a financial adviser. They can be held inside a tax-efficient wrapper such as an ISA or personal pension. Investors can also choose between lump sum and/or regular monthly payment into their Unit Trust.

Have a look at the unit trust funds we offer.

What AreThey?

Investment companies are a longstanding form of collective investment, with their origins dating back as far as the 1860s. Investment companies are listed on the London Stock Exchange and investors hold shares not units. The share prices of investment companies are subject to stock market supply/demand factors and changes in general investor sentiment. The prices can and will frequently differ from the value of the underlying assets.

Value of the Investment Companies

They provide a means for the investor to gain diversified exposure to the stock market or asset class and enjoy a number of unique features, such as the ability to ‘gear’ (borrow money) to seek to enhance returns and to retain income to allow them to smooth dividend payments, helping them to stand out as attractive options in an increasingly complex investment landscape. This means they can play an important part in the composition of an investment portfolio.

How Do You Invest?

Investment company shares are traded on the stock market. The principal means of investing are through a stockbroker or, an online broker. You can invest a lump sum amount or on a regular basis – from as little as £50 a month.

Key Benefits

  • Typically, investment companies are an economical way to invest in the stock market. Most have low charges, with dealing and administration costs pooled.
  • Unlike unit companies and OEICs, investment companies are closed-ended, meaning there's only a limited amount of shares for sale. So when investors buy and sell these shares, the company's underlying portfolio of investments isn't affected. This lets the fund managers take longer-term investment decisions.
  • The fund managers are also able to borrow money, or 'gear' their portfolios to exploit a favourable purchasing opportunity without having to sell existing investments.
  • Investment companies were designed to provide a cost-effective means of investing in various companies and / or asset classes, so although you buy shares in only one investment company, you're accessing a diversified portfolio.
  • Since investment companies are companies listed on the stock market, they have independent boards of directors directly answerable to the shareholders (as an investor that is you).
  • Investment companies have the ability to smooth dividend payments by holding back money in the good years to maintain regular income payments during periods of market volatility and weakness.

Investors, preferably with the help of a stock broker or IFA, should decide if an investment company suits their needs and risk tolerance, and if so, establish which company best suits their investment objective.

Warning
Risk warning - Investment involves risk. The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results.