Open-ended investment companies

OEIC stands for open-ended investment company. An OEIC has a company structure so that when you invest you will hold shares. An OEIC is open-ended which means that the fund can get larger or smaller depending on the number of investors who wish to buy or sell shares. Many investment funds in the US and Europe have a similar legal structure.

OEICs are a relatively new form of investment vehicle. They are increasingly replacing unit trusts, which are very complex in legal terms, having originally been invented to protect the assets of knights who were away on the crusades!

One advantage of an OEIC is that it has a single price, directly linked to the value of the fund's underlying investments. All shares in the fund are bought and sold at this single price. This contrasts with unit trusts, which have different buying and selling prices.

Any initial charge is shown as a separate item on your transaction statement. By contrast, the charges for a unit trust are included in the buying and selling prices, which makes it more difficult to understand exactly what you're paying for.

Another great advantage is the ability to establish a single umbrella OEIC which has a series of funds within it specialising in particular areas. These are known as sub-funds and allow investors' money to be put to work in specialist areas such as UK equity or emerging markets - the choice is vast.

	Fidelity's OEICs