Name-calling in a profusion of investments
Sunday 19 March 1995
Draft regulations to be published by the Treasury next month are expected to suggest that a new type of open-ended investment company to be launched later this year be called "investment fund companies". This would replace the acronym Oeics, pronounced "oiks", the current working title.
If the suggestion is adopted, investors could face a line-up of three different but similarly named collective investments by the end of the year.
q Unit trusts are funds set up under a trust deed to manage investments for people who buy units in the fund. They are open-ended, since the size of the fund varies as units are created for sale to investors or bought back by the managers.
q Investment fund companies - Oeics - will be unit trusts adapted to meet European standards and set up as companies with variable capital, so investors will buy and sell shares, not units. These companies may or may not have a stock exchange listing.
q Investment trusts are companies listed on the stock exchange that manage investments for their shareholders. They are closed-end funds and cannot raise money by creating new units. But unlike unit trusts, they can gear up by borrowing.
Julian Tregoning, chairman of the Association of Unit Trusts and Investment Funds, the unit trust trade organisation, said he was happy with the proposed name change. "Oeics is a stupid acronym," he said, "and `open-ended' doesn't mean anything to anybody."
Mr Tregoning said he did not see any risk of confusion for investors. "It is just a question of how the unit trust industry handles it," he said.
His organisation changed its own name from the Unit Trust Association to the present title in April 1993, allowing it to include the new investment funds under its remit. The name has been agreed with Anthony Nelson, Secretary to the Treasury.
Ernest Fenton, director-general of the Association of Investment Trust Companies (AITC), is irritated by what has happened. "Anthony Nelson has got it into his head that the `industry' wants the name `investment fund companies'," he said. "I have told him very strongly this is not so - not in my part of the industry, anyway.
"There is always a lot of confusion as to what the differences are between investment trusts and unit trusts, and we have spent a great deal of time and money to explain. Here we have a chance to make things clearer and what is suggested is a name that only adds to the confusion."
Mr Fenton said his investment trust members felt that any title chosen for the new vehicle should contain either the word "open" or the phrase "variable capital", to make the contrast with investment trusts clear and avert the danger of investors buying the wrong thing.
The investment trusts have begun researching public opinion on a handful of possible titles for the new vehicle.
Meanwhile, each trade association is continuing to field calls from investors about the differences between existing unit trusts and investment trusts.
"People are thoroughly confused," said Geraldine Ross of the AITC. "They think they know what a unit trust is because they hear about them all the time. But once you go into it, they obviously don't."
Unit trust prices directly reflect the value of investments held by the fund. Investment trust prices are influenced by stock market supply and demand and may be either "at a premium", above the net asset value of investments held, or "at a discount", below net asset value.
Ms Ross said many potential investors were wary of buying investment trusts at a premium and had the idea they should always try to buy at a discount and sell at a premium.
"We say there is always a reason for either a premium or a discount. You need to look at the price you are paying and the price you hope to sell at - that is where you are making your money."
She said that because the AITC was barred from giving investment advice, it steered clear of any suggestion that unit trusts with a 5 per cent front-end charge were effectively also selling at a premium.
- 2 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 3 University student in court for allegedly covering housemates' food in window cleaner and spit
- 4 Ryan Gosling posts tribute to 'Ryan Gosling Won't Eat His Cereal' creator Ryan McHenry
Italian police 'reveal' what Jesus looked like as a young boy
Mysterious 'X-Files' sounds heard miles above the Earth
Garland shooting: Isis claims attack on Prophet Mohamed cartoon contest in Texas as its first action on US soil
Met Gala 2015: Beyoncé manages to out-skimp Rihanna, Miley and Kim Kardashian combined with near-naked ensemble
General Election 2015: Photographic history of Bullingdon Club tracked down - including new picture of David Cameron in his finery
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...