What are OEICS?

By THIS IS MONEY
Updated:

 

I want to invest in a tracker fund. Some are described as OEIC sub-funds. What does this mean and how do they differ from unit trusts? D

Clare Arber of the Association of Unit Trusts and Investment Funds (AUTIF) says: An OEIC (pronounced 'oik') is an investment company formed using a new, specially-written company law and a basic corporate structure commonly found in Europe and the USA, so they are more like European investment funds. Unit trusts, as their name suggests, are structured according to ancient laws relating to trusts.

In many respects OEICs are just a modern version of the unit trust, but in an OEIC you buy shares rather than units, and OEIC pricing is easier to understand as OEICs only have one price, and you pay the costs of investing separately. With unit trusts there are both buying and selling prices. Managers' charges and advisers' commissions are included in the calculation of both, so what you pay is not so clear.

OEICs can act as an umbrella, and so have several sub-funds with different investment objectives. One may invest in UK shares, another in UK corporate bonds, a third in American shares, and some shares may be issued in other currencies, so you can easily diversify your portfolio according to your investment objectives. You can also buy shares in OEICs at the same time as paying your adviser for advice, ie, without having to pay separately, or you can make your own investment decisions so you don't incur adviser commissions.

In many respects however OEICS are just like unit trusts - they can both expand or contract to meet demand. You buy OEICs via their authorised corporate directors (equivalent to unit trust managers), company sales people, independent financial advisers or stockbrokers.

For more details get the AUTIF OEIC Effective Investment factsheet from 0181 207 1361.

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