Open-Ended Investment Company (OEIC)

(The weekly series - Pocket Money - where I explain financial basics in fewer than 200 words. Feel free to make suggestions!)

An OEIC (pronounced ‘oik’) is a type of collective investment which pools money from lots of investors and buys a diversified portfolio of assets. It is structured as a company and you buy shares in the company not the underlying assets. 

The open-ended part means that the fund can expand or contract in size depending on demand, so new shares are created as more people want to invest and shares are cancelled when people want to withdraw. This makes it different from an investment trust which has a fixed number of shares which are traded on a stock exchange. 

There is generally an annual management charge, sometimes transaction fees (for what’s being bought and sold within it) and the value or the investment can of course, go up or down, so it would be a longer term investment. 

OEICs are managed by fund managers according to stated objectives - perhaps a specific market sector or geography. In the UK they are regulated by the FCA. You can hold them within an ISA or SIPP tax wrapper or in a general investment account.

Love Eleanor. xxx