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Trusts from ASC Financial Solutions – Milton Keynes, Buckinghamshire


‘OEIC’ stands for ‘Open-Ended Investment Company’. Essentially an OEIC is a pooled investment fund of variable size in corporate form. It owns investment assets, for example, stocks and shares, gilts, bonds and certain other financial instruments.

An OEIC’s investors own shares in the company rather than units as in a Unit Trust. The shareholders have the right to sell their shares back to the OEIC on any dealing day when trading has not been suspended.

Unit Trusts

Unit Trusts are a common type of collective investment.

A Unit Trust is a large fund of monies and/or investments pooled together and controlled by the trustees with the aim of gaining capital appreciation, income or both.

Unit Trusts are made up of ‘Units’. Each unit will have both a buying price and a selling price. The difference in these prices includes the fund management charges. The number of units held, multiplied by the current price, gives the current value of an investors holding.

These investments are open-ended, which means that units are created every time an investor puts money into the fund, and liquidated when they withdraw money, so the fund can react to demand and continually grow through prosperous periods.

Investment Trusts

An Investment Trust is simply a company that invests in the shares of other companies. As a company, the Investment Trust has shares which are quoted on the stock market. Unlike Unit Trusts and OEICs, an Investment Trust is a ‘closed ended’ investment vehicle where regardless of the number of investors, the number of shares does not change. As such, although the share price of an Investment Trust is to an extent related to the value of the investments in the fund, it is ultimately dictated by supply and demand. The value of the shares will therefore depend on the number of investors looking to buy or sell the shares and consequently Investment Trusts trade at either a discount or premium to the value of the assets it holds.

As a company, Investment Trusts have the ability to borrow money which can then be used to buy further investments, this being known as gearing. Whilst this can have the positive effect of boosting returns if investments perform well, losses can be exaggerated if the investments perform poorly.

Investment Trusts frequently issue different types (classes) of shares. The different classes of shares will suit different investors dependent on the investors attitude to risk and their need for income or growth.

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