Open-Ended Investment Company

Open-Ended Investment Company

Open-Ended Investment Company is also known as OEIC is a format or structure to invest in various bonds, securities, and stocks which are formed under Corporation of Open-Ended Investment Company Regulations 2001 in the United Kingdom. The shares in OEIC are listed on the London Stock Exchange (LSE). These funds can adjust the fund size according to the investor’s preference and the prices of the shares are based on the fund size of the investor.

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These funds are known as open-ended funds because an investor can enter and exit the market as per his/her wish without any barriers. There are some initial charges to be paid when the investors enter the market or while buying new shares known as Front End Load (Entry Load). As the Front End Load, there is also Exit Load which is paid while exiting the market or while selling the shares. Most of the OEIC do not charge Exit Load. They can create new shares to meet their demands or even sell the shares to exit the market. The shares in OEIC are priced only once a day. The bid and ask price here is the same, unlike Unit Trust. The OEIC functions for medium to long term (5-10 years or more). Asset Management Company charges 1-1.5% of the value of the shares.

How Does It Work?

Investing in OEIC means buying shares in the company, now the investors who do not have time, interest, or expertise generally invest an OEIC. There is an investment manager for each investor to manage their funds. The number of shares keeps on varying as the manager buys and sells the shares. The investor can make a single or monthly payment for the shares with a minimum amount. The money of the investor is combined with all different investors in the market and then invested in any shares, bonds, or securities. This is known as the Fund Investment Portfolio. The reason behind combining the money with different investors is that the investment manager gets more options and can invest in better security to give the investor much higher returns. This reduces risk by spreading the money across a number of different investments.

The value of the OEIC fund is linked to the performance of the investor’s portfolio. When the value increases ↑ the value of the shares also rises↑ and when the value decreases ↓ the value of the shares also goes down .

Pros And Cons of Open Ended Investment Company:


  • Money is invested in a wide range of securities.
  • Risk is reduced as the money is diversified in a number of securities.
  • Managed by the investment manager.
  • OEIC is highly liquid.
  • The minimum amount can be invested.


  • Entry and exit load are charged while buying and selling the securities.
  • Requires medium to the long term of the investment.
  • When the value of the OEIC decreases the value of the shares also decreases and leads to a loss.
  • Asset Management Company charges 1-1.5% on the value of the shares.
  • They are priced only once throughout the day.

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Real-World Example:

British OEICs are comparable to American mutual funds, and many U.S investment companies that do business in the U.K offer them. One such is Fidelity International, an overseas division of Fidelity Investments. In July 2018, the divisions announced it was instituting variable management fees for five UK-domiciled OEICs, including the Fidelity Special Situations, Fidelity European, Fidelity Asian Dividend, Fidelity Global Special Situations, and Fidelity American Funds. The change effectively reduced the base Asset Management Company (AMC) of the funds by 10%.

How Are OEICs Different From Unit Trust?

  • Unit Trust (UTs) is governed by the Trust Laws while the OEICs are governed by the Company Laws.
  • The investors in the Unit Trust are not the owners while the investors in the OEICs are the owners of the investments.
  • OEICs are priced only once throughout the day while the Unit Trust has a Bid as well as Ask price. The Bid price is the price the investor receives and the Ask price the investor pays. The difference between the Bid price and the Ask price is known as the Bid-Ask spread.
  • OEICs charge fewer fees than the Unit Trust due to the simple structure of the OEICs and so many Unit Trust are changing into OEICs.

Bottom Line:

Open-ended investment companies are a good option to invest in with a minimum amount and a risk-free investment. There is also a fund manager to look into the investment even though the investor is not an expert. But there are not just the pros but also the cons to Open Ended Investment Companies. The entry and exit load is the biggest disadvantage in OEICs. There are only medium to long-term investment options. They are priced only once throughout the day.


Author – Saachi Lodha

About the Author – A passionate professional with knowledge of Accounting and Finance and currently exploring Financial Risk Management (FRM) to gain knowledge and exposure. As a part of the FRM course also writing blogs to explore the field more and deep dive into the content.


Open-End Mutual Funds

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