Open-ended investment company

Open-ended investment company

Open-ended investment companies, or (OEICs, are investment funds that allows investors to pool their capital together and invest in a diversified portfolio of assets. With OEICs, you may invest your money in various assets without dealing with the trouble of maintaining them personally. 

What is an OEIC? 

An OEIC is an investment fund designed to give investors the flexibility to buy and sell shares as and when they choose. OEICs are generally set up as companies but differ from traditional closed-end investment companies because they do not have a fixed number of shares. 

One of the key benefits of OEICs is that they offer investors a wide range of investment options. OEICs can invest in various assets, including equities, bonds, property, and cash. This means investors can choose a fund that reflects their investment goals and risk profile. 

Another advantage of OEICs is that they are very flexible. Unlike traditional investment funds, which are often subject to strict rules on when investors can buy and sell shares, OEICs allow investors to buy and sell shares at any time. This means that investors can easily adjust their portfolios to reflect changing market conditions or their investment objectives. 

Understanding an OEIC 

When investing in OEICs, it is important to understand the risks involved. Like any investment, there is potential loss, and investors should properly consider their risk tolerance before investing. It is also important to consider the fees associated with OEICs, which can vary depending on the fund. 

On any business day, investors may purchase and sell shares in the OEIC. A fund’s net asset value (NAV) determines the share price, and the valuation of the underlying investments is used to compute it daily. The fund manager does investment management. To achieve the OEIC’s investment goal, he also decides whether to acquire and sell stocks. 

OEICs can be a good option for investors who want flexibility and a wide range of investment options. By understanding the benefits and risks of OEICs, investors can make informed decisions about whether these investment vehicles are right for them. 

Charges for OEIC shares 

One of the main charges associated with OEIC shares is the ongoing charges figure (OCF). This figure includes the management fee, administration fees, and other fund management costs. From 2023, there will be a cap on the OCF for OEICs, set at 0.75%. This means that investors will only have to pay 0.75% of their investment in charges each year. 

In addition to the OCF, investors may be charged a performance fee if the fund performs well. This fee is usually a percentage of the amount the fund has outperformed its benchmark. Performance fees are subject to tighter regulation, with the Financial Conduct Authority (FCA) introducing new rules to ensure they are fair and transparent. 

Finally, investors should also know the dealing costs associated with buying and selling OEIC shares. These costs can include broker fees, stamp duty, and other charges.  

By capping the OCF, regulating performance fees, and providing clear information on dealing costs, investors can make more informed decisions about their investments and ensure they get the best value for their money. 

Investing in OEICs 

For investors who need more knowledge, motivation, or time to manage their holdings effectively, OEICs are a great choice. Investors can invest a single payment or a series of minimum monthly payments depending on the fund. Obtaining money through the phone or the internet is usually simple. Moreover, there can be a cost for shareholders who switch between funds. 

US individuals may not hold shares of OEICs. US stockholders must transfer their holdings or sell their shares to UK citizens through the OEIC. 

Example of OEICs 

The Vanguard FTSE 100 Index Fund is an illustration of an OEIC. This fund invests in the FTSE 100 index, which measures the 100 largest firms on the London stock exchange. By purchasing shares of the index firms, the fund aims to track the performances of the FTSE 100 index. Vanguard manages the fund, a significant investment management company. 

Frequently Asked Questions

The following are some of the key roles of regulators: 

  • Imposing penalty for non-compliance. 
  • Public interest protection. 
  • Facilitating the settlement of disputes between parties 
  • Monitoring adherence to other legal and regulatory standards and contractual commitments to the users and government. 
  • Executing periodic inspections and tariff adjustments 
  • Establishing technical, safety, and quality standards and ensuring their adherence, if not already specified in the contract terms 
  • Creating accounting standards and doing operator cost and performance evaluations 
  • Giving the government advice and guidance on matters of policy and other issues pertaining to private sector engagement in the sector 

You can purchase shares in OEICs in one of three ways: 

  • Directly from a management firm that provides the fund 
  • Via an independent financial advisor (IFA) 
  • Using an online brokerage or share trading service 

OEICs must pay corporate tax on their taxable earnings at the funds rate of tax, which is equivalent to the basic income tax rate (currently 20%). At the fund level, capital gains are not taxable; clients are subject to CGT on disposals. 

The main difference between OEICs and unit trusts lies in their legal structure. OEICs are structured as companies, while unit trusts are structured as trusts. This means OEICs have a board of directors and shareholders, while unit trusts have trustees and unit holders.   

Another difference between OEICs and unit trusts is how they price their units or shares. OEICs use a single pricing mechanism, meaning that the price of a share or unit is calculated based on the fund’s NAV at the closure of each trading day. On the other hand, unit trusts use a dual pricing mechanism, meaning there are different prices for buying and selling units.  

Lastly, OEICs and unit trusts have different tax implications. OEICs are subject to corporate tax on their profits, while unit trusts are not. However, unit trusts are subject to tax on any income or capital gains distributed to unit holders. 


The major difference between the two is how they are structured and traded. OEICs are structured as companies that issue shares to investors, and the number of shares can fluctuate based on demand. On the other hand, ETFs are structured as investment trusts that issue units that can be traded on an exchange like a stock.  

Another key difference is that OEICs are priced based on the underlying assets’ NAV, which is calculated at the end of each trading day. On the other hand, ETFs are priced throughout the trading day and can trade at a premium or discount to their NAV. 


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    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

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