An OEIC, or open-ended investment company, is a pooled fund that issues and cancels shares as investors buy in or sell out. Money from many investors is combined and run by a fund manager across a spread of assets.
In one line: An OEIC is a pooled, open-ended fund that creates or cancels shares as investors join or leave.
How an OEIC works
OEICs are authorised and regulated by the FCA. Being open-ended, the fund expands or contracts with demand, and shares are priced once a day at a single net asset value, so there is no buying and selling price difference.
For example, an investor putting 5,000 GBP into an OEIC priced at 2.00 GBP per share receives 2,500 shares, with the value moving as the underlying holdings rise or fall.
Charges include an ongoing charges figure and any platform fee, which reduce the net return over time.
OEIC vs an ETF
An OEIC is open-ended and priced once a day at a single net asset value. An ETF is also pooled but trades on an exchange throughout the day with a bid-offer spread.
OEICs avoid that spread because they price at a single point, which can suit regular monthly investing.
Primary source: FCA: Authorised funds