Unit trusts and OEICs
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10. OEICs - Open Ended Investment Companies
OEICs are near relatives of unit trusts which came into being in the UK in 1997. They are collective investment vehicles but structured as companies rather than trusts.
The main advantage of OEICs for fund management groups is that they can be sold across national borders in the EU.
- The OEIC is structured and conducts itself like an investment company (rather than a trust), with the ability to issue different classes of shares (rather than units).
- The OEIC is governed by its 'Instrument of Incorporation' rather than by a trust deed. The Instrument of Incorporation and the scheme particulars are published in the prospectus.
- An OEIC may be structured as a single fund or as an umbrella company for several sub-funds.
- A board of directors or an Authorised Corporate Director (ACD) performs the same function as the unit trust manager and deals with the day to day running of the fund including investment, share pricing and compliance with the FSA regulations. The ACD is authorised by the FSA.
- A depositary performs the same role for the OEIC as the trustee for the unit trust. The depositary can be an independent person or financial institution like a clearing bank whose role is to protect the interests of shareholders and to act as the custodian of the fund assets. The depositary is authorised by the FSA.
Like a unit trust, the OEIC itself must be authorised by the FSA before it can be promoted to the public in the UK.
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