What is the difference between Unit Trusts/OEICs and Investment Trusts?
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 and is controlled by a Fund Manager.
A difference between a Unit Trust and OEIC is that OEICs quote a single price rather than a bid and offer (buy and sell) price and they are governed by Company law rather than trust law. Most new Funds launched today are established under the OEIC structure and it is widely predicted that, over time, most Unit Trusts will convert to OEICs.
Investment Trusts are a type of collective investment which are closed-end and as such are constituted as public limited companies. One of the key differences between an investment trust and a unit trust, is that an investment trust manager is legally allowed to borrow capital to purchase shares. This leverage may increase investment gains but also increases investor risk.