As with publicly traded companies and their share price, a unit trust has two different prices: a buy or "offer" price, and a sell or "bid" price. The difference between the two costs for the units or shares, reflects the spread on the underlying market between buying and selling prices, usually between one percent and five percent, depending on the market. An OEIC, on the other hand, is an organisation that issues shares and these shares have one price, a "mid" price, which as the name suggests, is approximately half-way between the buying and selling price on the market.
OEICâ€™s and unit trusts are really quite similar because despite the small differences, the majority of OEICS are actually formed from a unit trust conversion and are generally compared with each other in performance tables as if they were one and the same. The actual sectors these funds invest in are very varied from a whole stock market to international financial markets and even individual areas within a market, for example technology or small companies.
The majority of the funds are actively managed meaning that the fund manager will spend his time choosing which companies and markets to invest in. However, one of the key growth sectors at the moment is the so-called â€śtrackerâ€ť or â€śindexedâ€ť funds that follow the rise and fall of certain market indexes. These funds however, are passively managed in contrast to the others, meaning that they come with much lower fees and costs. The choice between which of these funds is better for the private investor can be quite difficult and is much debated however it is commonly pointed out that few actively managed funds ever manage to outperform the market indexes which they are based in.
Managed unit trusts or OEICS, frequently charge both a sign-up/entry charge of up to 5% and a minimum of 0.5-2.5% per annum as a service charge. Some funds do have an exit charge with as much as an additional 5% if you withdraw your money within a certain period of time. On the other hand, tracker funds only charge around 0-3% entry fee and then around 0.5% per annum in management. Unit trusts and OEICS investments can often be taken out through large institutions such as banks and building societies as well as the larger fund management companies that offer private wealth management services.