Investment Trusts & OEICs

EJM_2

Dear All,

I have two questions that I need answered so please can you help???

What is the difference between (1) Investment Trusts and (2) OEICs?

What is the difference between (1) Insured Funds and (2) Mutual Funds?

I look forward to recieving your answers.

KenC_3

I can answer the first one.

An investment trust is a closed ended fund and an OEIC an open ended fund. This means that with an IT there are a defined amount of shares in issue and with an OEIC units are created or redeemed when investors put money in or take it out.

In practice this makes a huge difference. While you invest and divest from an OEIC at net asset value (total value of fund/ units in issue) the price of an IT will depend upon supply and demand for the shares. So an IT may have an NAV of, say, £1 but the share price could be at a discount or premium, so could be £0.80 or £1.20, and this can fluctuate daily.

OEICs are very liquid, as the management company will issue and redeem units at the next valuation point whereas ITs may be illiquid if there are more sellers than buyers.

dunstonh

Mutual funds is more of an American term but has crept into the UK market with some and generally refers to investment funds in general rather than to one tax wrapper. In other words, another name for collectives or investment funds.

Insured funds are those funds held in a life assurance wrapper or pension wrapper (not including SIPP). Generally that means they have to be issued by an insurance company. These fall under the FSCS insurance protection rather than investment.