OEICs or investment trusts are investment companies that pool investors’ money and use expert fund managers to invest in shares, bonds or other types of investment. They give you diversified, professionally managed exposure to the growth potential of global stock markets.
OEIC stands for Open Ended Investment Company. They allow you to pool your money with other investors so that you can invest more cost-effectively in stock and bond markets.
They are ‘open ended’ which means that more shares can be issued each time someone invests, which means you can always buy or sell whenever you want. They are UK domiciled funds and offer a wide range of choice by sector, region and by the type of investment, such as equity funds and bond funds.
Investment trusts are closed ended, meaning they issue a fixed number of shares, which are publicly traded on the London Stock Exchange. They can borrow money so that they can increase their exposure to stock markets and therefore potentially enhance returns (known as gearing). Gearing will exaggerate market movement both up and down which could mean sudden and large falls in value.
As stock market-listed companies, investment trusts also have independent boards to represent your needs as a shareholder, meaning you get the same level of protection as the shareholders of any other public limited company.
There are some key differences between investment trusts and OEIC funds.
See our comparison table