They all want to be Oeics

Hopes have now faded for the launch of a new type of investment vehicle, known as an Oeic, before 5 April.

An Oeic (pronounced "oik") is an open-ended investment company, a structure that combines the best features of unit and investment trusts with some advantages of its own.

The Treasury regulations for Oeics came into force on 6 December, but the technical details of their tax treatment have still not been ironed out. So it now looks as though investors will have to wait until May at least before putting their money into the new funds. "The big issues have all been resolved," says one of those involved. "It's a bit more than dotting the I's and crossing the T's, but it's essential to get the details absolutely right from the start."

Many of the big investment groups, and several of the smaller, specialised houses, are already hard at work planning for the introduction of the Oeic. But plans cannot be finalised until the regulations have been completed and scrutinised by legal, tax and compliance specialists.

The main attraction of Oeics is that they will be able to operate as umbrella funds with several sub funds, each with its own distinctive flavour. This means, for example, that if you invest pounds 100 a month in an Oeic, you could put pounds 50 in a conventional UK growth and income fund, pounds 25 in emerging markets and pounds 25 in corporate bonds. Then, at year end, you could switch all or part of your holdings into whichever fund held out the best growth prospects.

Pricing will also be simplified: Oeics will have a single price, the net asset value (NAV), rather than the bid/offer spread quoted for unit trusts.

The other attraction, from an investor's point of view, is that Oeics should be cheaper to run and that could well herald another round of reductions in fund management charges.

Many unit trusts are expected to convert to Oeics, taking advantage of a tax concession that lasts until 1999, which will allow the change without either the fund or individual investors being taxed on the gains when their units are exchanged for shares in the new company.

Among the first likely to go down this route is Murray Johnstone, which has a range of onshore and offshore funds. Richard Eliott Lockhart, the managing director, believes that the change will allow the group to simplify and expand its range of funds.

The final bit of good news for investors is that Oeics will be 'PEPable' in the same way as unit and investment trusts.

Oeics and their cousins the Sicav (Societe d'Investissement a Capitale Variable) are already established in Europe, and this is one reason for their introduction here - to provide the UK fund management industry with a product they can readily sell in continental markets.

But that is, of course, a two-way street, and it is likely that some of the first Oeics may well be the products of fund managers from mainland Europe.