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From Wikipedia, the free encyclopedia
[edit] United Kingdom
In the United Kingdom the term "mutual fund" may be confusing due to the existence of building societies and mutual life companies which in law are owned by their members and which have no share holders to distribute profits to and consequently are referred to as "mutuals". Collectively managed funds are referred to by type, and the following are the principal ones are available:
- Investment trusts which are themselves quoted companies, often with a fixed life. The quoted price of the company may trade at a discount (lower) or premium (higher) than the value of the investments it holds at any point in time, giving rise to more volatility and risk as well as opportunities. Investment trusts may also be split into different types of shares to appeal to different types of investor. These are known as split capital trusts.
- Unit Trusts are traditional arrangements set up as a trust rather than a company and are open-ended. The fund is divided into units rather than shares that build in trading and management costs through the canceling of units meet management charges and by way of a dual pricing policy of units to meet trading costs. Units have a bid (buying) and offer (selling) price at a given time and the difference is known as the bid-offer spread.
- OEICs (pronounced "OIKS") is an acronym for "Open-Ended Investment Companies" which are rapidly displacing Unit Trusts which operate under, what is considered to be, archaic rules. Additionally OEICs are easily marketed overseas and are seen as a way of developing the collectively managed fund market. A major difference is that OEICs have shares (but unlike Investment Trusts they reflect asset value like the units in a unit trust) and these are traded with a single price (any initial charges are levied explicitly by reducing capital).
- ICVCs' (Investment Companies with Variable Capital) an alternative name for OEICs.
Tax favoured products such as Pensions or Individual Savings Accounts may include any of the above, although separate Pension funds and (subject to involved differences) Life Insurance funds exist with their own legislative control and tax treatment.
