Money Minder UK

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Open-ended Investment Funds

Open-ended investment funds are run by fund management companies. The funds are generally worth millions and are invested in from across the world.

The reason they're called 'open-ended' is because there are no limits on the number of shares that can be bought or sold - there is an open-ended number of shares. The number of shares issue increases as more people invest and decreases as people take their money out.

As with most stocks you buy shares hoping the value rises over time as the company or stock performs well.

Many larger funds pay-out a 'dividend', an income from the profits made by the company.

You can choose whether to invest lumpsums or to save regularly.

You can buy funds directly from the investment management company or through a financial adviser, a stockbroker, private client investment manager or fund supermarket and you can usually find the price of units/shares published in newspapers or online

There are many different types of fund including unit trusts, OEICs (Open-Ended Investment Companies, which are the same as ICVCs - Investment Companies with Variable Capital), SICAV (Socit d'investissement - capital variable) and FCPs (Fonds communs de placement). The above list includes certain European funds called UCITS schemes which are permitted under European legislation to be sold in the UK. Source: FCA

As with all investment vehicles one of your first concerns should be - does this fund match my risk attitude?

Open-ended investment funds generally invest in one or more of the four asset classes - shares, bonds, property and cash. Few invest principally in property or cash deposits, while some funds will spread the investment across shares and bonds.

This can be useful given asset allocation is the key to successful investment - you want to spread your investment across different asset classes.

The level of risk depends entirely on the underlying investments and how well diversified the open-ended investment fund is.

A fund only investing in one industrial sector, such as technology, will invariably be more risky than funds that invest across the whole range of companies in a market.

You can rest easy that your fund manager will aim to act in the best interests of your fund (not least because that's how they make their decision). As a safety-net, trustees or depositories ensures the management company is acting in the investors' best interests at all times.

Because of the range of open-ended funds available it's likely you'll be able to find one that suits both your risk attitude and investment goals. However this can sometimes be difficult to spot, especially of you don't understand all the financial jargon. Our advisers can help you identify which funds might appeal to you.