Glossary · UK
What is Open-Ended Investment Company (OEIC)?
A UK collective investment fund structured as a company rather than a trust, whose share price is based directly on the value of its underlying assets, with shares created and cancelled as money flows in and out.
Full Definition
An Open-Ended Investment Company (OEIC) is a type of collective investment fund structured under company law rather than trust law, in which investors buy shares in the OEIC itself, and the value of each share is directly linked to the net asset value of the fund's underlying investments divided by the number of shares in issue. Like a unit trust, an OEIC is open-ended, meaning new shares are created when investors put in new money and existing shares are cancelled when investors withdraw, so the fund's size grows and shrinks with demand, and the share price tracks the underlying asset value closely, in contrast to a closed-ended investment trust, whose fixed number of shares trade on a stock exchange at a price set by ongoing buying and selling, which can drift to a premium or discount above or below the underlying asset value. OEICs were introduced in the UK in the late 1990s partly to align UK fund structures more closely with the company-based fund structures common in continental Europe, and many older unit trusts have since converted into OEICs, though the underlying investor experience -- pooling money with other investors, professional fund management, and daily single-point pricing -- is very similar between the two structures. OEICs are regulated by the Financial Conduct Authority, are usually structured as an "umbrella" company containing several sub-funds with different investment objectives (for example a UK equity sub-fund and a global bond sub-fund) under one overall legal entity, and can be held within tax wrappers such as a Stocks and Shares ISA or a SIPP in the same way as a unit trust or investment trust.