What is meant by an open-ended collective investment?
Unit trusts and OEICs are open-ended collective investments. They are open ended because the number of units or shares in each fund will vary according to supply and demand. Unit trust funds allow units to be created when people invest and units to be cancelled when individual investors cash in their investment. The unit price fluctuates up and down to reflect the exact value of the underlying investments held in the fund, with prices usually changing daily. OEICs work in a similar way to unit trusts, except that they issue shares in a fund, rather than units. As demand for shares increase the OEIC issues more shares and as supply decreases shares are cancelled. Meanwhile the shares still move up and down in line with the funds underlying assets and the fund is owned collectively by all investors.
