What are the different types of funds?

There are a number of different types of investment funds; most have the same kind of investment capabilities; the main differences relate to their underlying legal structure and to the countries where they are legally registered.

These are the types of funds that Artemis offers to its investors:

• Unit trusts
• OEICs
• SICAVs
• Investment trusts

Unit trusts

The first unit trust was launched in the UK in 1931. It is a form of collective investment fund which pools the money of all investors into a single fund, managed by a fund manager.

Those investing in the unit trust own ‘units’ of it (in other types of investment funds, these are usually called ‘shares’). The number of units is not fixed and when more is invested in a unit trust (by investors opening accounts or adding to their accounts), more units are created.

Unit trusts offer access to a wide range of investments, such as shares, bonds and gilts.

• Pricing: The price of the units is based largely on the underlying assets of the fund. Unit trusts are priced once a day, based on the 'net asset value' (NAV) of their underlying portfolio assets. The price is termed the 'mid price'.
• Management: A fund manager is appointed by the trustee of the unit trust to manage the investment of the trust assets, and in return the fund manager receives an annual management fee. The profits generated by trust’s investment are either distributed to unitholders as income or reflected in the unit prices as capital gain if unrealised. The trustee also ensures the fund manager keeps to the fund's investment objective.
• Voting rights: Each investor ('unitholder') will have the opportunity to vote on any major proposed fundamental changes to the structure of the unit trust.
• Charges and costs: Most unit trust funds carry sales charges and annual management fees, known as the ongoing charge.
• Trading: Unit trusts do not trade on the London Stock Exchange.
• Regulation: Unit trusts are regulated by the UK Financial Conduct Authority (FCA).

OEICs

An OEIC is an acronym for Open Ended Investment Company, which is a type of investment fund domiciled in the United Kingdom that is structured as a company in its own right, with the ability to invest in shares and other financial securities such as bonds.

Those investing in the OEIC own ‘shares’ of it. They are called ‘open-ended‘ because they can create new shares to meet investor demand. Also, the fund will cancel the shares of investors who exit the fund. (Unit trusts are also open-ended but that isn't featured in their name for historic reasons).

Similar to unit trusts, OEICs are a form of collective investment fund which pools the money of all investors into a single fund, managed by a fund manager.

• Pricing: The price of the shares is based largely on the underlying assets of the fund. OEICs are priced once a day, based on the 'net asset value' (NAV) of their underlying portfolio assets. The price is termed the 'mid price'.
• Management: A fund manager manages the investment of the fund's assets, and in return the fund manager receives an annual management fee. The profits generated by trust’s investment are either distributed to shareholders as income or reflected in the share prices as capital gain if unrealised.
• Voting rights: Each investor ('shareholder') will have the opportunity to vote on any major proposed fundamental changes to the structure of the OEIC.
• Charges and costs: Most OEIC funds carry sales charges and annual management fees, known as the ongoing charge.
• Trading: OEICs do not trade on the London Stock Exchange.
• Regulation: OEICs are regulated by the UK Financial Conduct Authority (FCA).

SICAVs

The term SICAV is an acronym for its French name Société d'investissement à Capital Variable, which translates literally to English as ’investment company with variable capital’.

Those investing in a SICAV fund own ‘shares’ of it. Similar to open-ended funds in the UK such as unit trusts and OEICs, they are ‘open-ended‘ because they can create new shares to meet investor demand. Again similar to unit trusts and OEICs, SICAVs are a form of collective investment fund which pools the money of all investors into a single fund, managed by a fund manager.

• Pricing: The price of the shares is based largely on the underlying assets of the fund. SICAVs are priced once a day, based on the 'net asset value' (NAV) of their underlying portfolio assets. The price is termed the 'mid price'.
• Management: A fund manager manages the investment of the fund's assets, and in return the fund manager receives an annual management fee. The profits generated by investments are either distributed to shareholders as income or reflected in the share prices as capital gain if unrealised.
• Voting rights: Each investor ('shareholder') will have the opportunity to vote on any major proposed fundamental changes to the structure of the SICAV.
• Charges and costs: Most SICAV funds carry sales charges and annual management fees, known as the ongoing charge.
• Trading: A SICAV is publicly traded, meaning its shares are listed on a recognised European stock exchange such as the exchange in Luxembourg
• Regulation: SICAVs are regulated under European law.

Investment trusts

Investment trusts are public limited companies and are therefore 'closed ended' since the fund managers cannot redeem or create shares (in contrast to unit trusts and OEICs). The first investment trust started in 1868 "to give the investor of moderate means the same advantages as the large capitalists in diminishing the risk by spreading the investment over a number of stocks".

Although "trust" is part of their name, investment trusts are not trusts in the legal sense but a separate legal entity or company, overseen by a board of directors. The investment trust often has no employees, solely the board of directors comprising only non-executive directors.

When an investment trust is launched, a fixed number of shares are issued, which are bought by individual investors. The money raised from the sale of shares is pooled together. The board of directors typically delegates responsibility to a professional fund manager to invest that money in the shares and assets of a wide range of companies.

They are also known as investment companies.

• Pricing: In the same way as the share price of any company, the share price of an investment trust is affected by supply and demand; its shares are listed on the relevant stock exchange – essentially, market demand. This means that share prices may be bought and sold higher or lower than the NAV. Changes in the difference between the NAV and the share price can magnify the gains or losses on your investment.
• Management: Investment trusts follow the same rules as any other company whose shares are traded on the London Stock Exchange. For example, they have an independent board of directors whose role it is the look after the interests of shareholders. Members of the board are elected and re-elected by shareholders according to the normal governance rules for board members. They have an annual general meeting (AGM) which is open to shareholders, and the trust produces an annual report which is a review of how the trust has performed on a yearly basis. A shorter report is usually produced every six months.
• Voting rights: Each individual shareholder receives voting rights which enables her or him to attend the annual general meeting.
• Charges and costs: Most investment trusts carry sales charges and annual management fees, known as the ongoing charge.
• Trading: The shares of investment trusts are listed on a recognised UK-based stock exchange such as the London Stock Exchange or the exchanges in Jersey or Guernsey.
• Regulation: Investment trusts are regulated by the UK Financial Conduct Authority (FCA).

This information is intended to provide you with help and guidance about investing generally and about investing with Artemis. It is not a marketing communication and should not be used to make investment decisions. You should always refer to the relevant fund prospectus and KIID/KID before making any final investment decisions.

Artemis does not provide investment advice on the advantages or suitability of its products and no information provided should be viewed in this way. Should you be unsure about the suitability of an investment, you should consult a suitably qualified professional adviser.