On the previous page we noted that OEIC charges are 'explicit' which means that they are not incorporated in the single price but are added separately and explicitly later. The charges are:
The OEIC may levy an initial charge to cover expenses and commissions. This is shown as an explicit charge on the contract note.
A few OEIC providers have replaced initial charges with a sliding scale of exit charges over a number of years.
Whenever the fund managers have to enter the market to buy or sell securities, they can charge a dilution levy to those investors who have caused the fund to incur dealing costs.
In both instances, the fund managers have the choice of charging these dealing costs to the fund (and ergo to existing shareholders who have nothing to do with these costs) or charging them to the actual buyers or sellers whose actions have created these costs.
The following points should be emphasised:-
As with unit trusts, OEICs normally levy an annual management charge to cover operating costs and renewal commissions to intermediaries.