the difference betweeen...investment trusts, unit trusts and OEIC?

crisp

can someone be kind enough to explain the difference between

investment trusts, unit trusts and OEIC

their pricing and price movements.

the_annoyed_customer

crisp wrote: »

can someone be kind enough to explain the difference between

investment trusts, unit trusts and OEIC

their pricing and price movements.

Here is the definitons taken from wikipedia
OEIC:
An ICVC or Investment Company with Variable Capital is a type of open-ended collective investment formed as a corporation under the Open-Ended Investment Companies Regulations of the United Kingdom. They are also known as OEICs (pronounced oik) from these regulations. The terms ICVC and OEIC are used interchangeably with different investment managers favouring one over the other. In the UK ICVCs are the preferred legal form of new open-ended investment over the older unit trust.
As an open-ended company the manager must create shares when money is invested and redeem shares as requested by shareholders. As with other collective investments ICVCs main function is to make money for the shareholders. This is achieved via investing in different asset classes such as equities, fixed interest investments and property. By using economies of scale they facilitate access to professional investment management for small investors.
Unit Trusts:
A unit trust is a form of collective investment constituted under a trust deed.
Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore[1], and the UK, unit trusts offer access to a wide range of securities.
Unit trusts are open-ended investments; therefore the underlying value of the assets is always directly represented by the total number of units issued multiplied by the unit price less the transaction or management fee charged and any other associated costs. Each fund has a specified investment objective to determine the management aims and limitations.
Investment trusts: A Investment trust is a form of collective investment found mostly in the United Kingdom. Investment trusts are closed-end funds and are constituted as public limited companies

In short in an investment trust one buys shares, of the company and someone in the company uses the money gained and invests it more widly in stokes and share than what you and I could supposedly do. Unit trusts in short are ran for a specific goal e.g. to bring a historic train back to the UK or something like that. But these are becoming extinct as people are now using OEIC's. OEIC's in short are a safer way to invest as they are not all put into stocks and shares as the money is invested in property fixed interest accounts and so on, they are becoming more popular.

purch

Unit trusts in short are ran for a specific goal e.g. to bring a historic train back to the UK or something like that

I think you may have got the wrong end of the something there.....

purch

their pricing and price movements

The price of a Unit Trust or OEIC is set by the Fund Manager, based on the underlying value of the assets held and the outstanding units.

The price of an Investment Trust is determined by the 'market' as the units/shares are traded just like any other Share/Stock. Because of this the price of the unit/share does not always equal the sum of the assets held. Also again because they are traded on a market, IT prices can be more volatile.

dunstonh

You also have to be wary that many people use the term "unit trust" to generically mean unit trusts and OEICs. The phrases: ICVCs, collective investments or mutual funds are starting to appear more often when referring to the UTs and OEICS as well.

cheerfulcat

A couple of further points on investment trusts -

The manager(s) can borrow money to invest.

They can trade at fairly large discounts or premiums to Net Asset Value. Some ITs have discount control mechanisms in place.

ITs can hold shares and debt in unquoted companies.

crisp

is the any particulare advantage or disadvantage to go with one or other?

I notice First State have an Asian Leaders Fund, but have an Investment Trust called Scottish Oriental Smaller Companies (LSE: SST). Slightly different but same region.

cheerfulcat

Hi, crisp,

To my mind one of the biggest advantages of ITs over UTs/OEICs is the possibility of buying at a discount. When Neil Woodford took over the Edinburgh IT it stood at a discount of ( from memory ) between 5 and 8%. ITs as a rule also have lower fees and no trail commission.

Having looked at the Asian Leaders Fund and the Scottish Oriental IT, it strikes me that the IT is currently available at a 12.5% discount to NAV. However it looks a fair bit riskier than the OEIC not least because it's invested in smaller companies.