The vast amount of differing fund structures available when you are looking to invest can be daunting. One such structure that you will likely see is the ‘Open-Ended Investment Company’ (OEIC), also known as the ‘Société d’Investissement à Capital Variable’ (SICAV) in some jurisdictions.
Unlike traditional mutual funds, which are common in the United States, OEICs and SICAVs are prevalent in Europe and other regions.
OEICs and SICAVs offer several advantages over other investment vehicles. Their open-ended nature allows investors to buy and sell shares at the prevailing Net Asset Value (NAV) per share, ensuring liquidity and transparency. Additionally, these structures provide access to a wide range of asset classes and investment strategies, catering to various risk appetites and investment goals. As global financial markets continue to evolve, OEICs and SICAVs remain popular choices for those seeking exposure to international markets and professional fund management expertise.
An OEIC (or SICAV) is a collective investment scheme that pools money from multiple investors to invest in a diversified portfolio of assets. Unlike closed-end funds, which have a fixed number of shares traded on exchanges, OEICs and SICAVs are open-ended, meaning they issue and redeem shares based on demand.
This structure allows you to buy and sell shares at the fund’s Net Asset Value (NAV) per share, which is calculated daily based on the value of the fund’s underlying assets.
So, you can trade assets at the fund’s “Net Asset Value”, but what does this mean?
Well, Net Asset Value (NAV) per share, is a measure used to determine the value of each share in a mutual fund, exchange-traded fund (ETF), or other investment vehicle. It is calculated by dividing the total net asset value of the fund by the number of shares outstanding.
The net asset value (NAV) of a fund represents the total value of all the fund’s assets, including cash, securities, and other investments, minus any liabilities such as expenses or debts. By dividing this total value by the number of shares outstanding, the NAV per share reflects the value that each individual share represents.
NAV per share is typically calculated at the end of each trading day or at regular intervals determined by the fund’s management. Investors use NAV per share as a reference point to determine the fair market value of their investment and to track the performance of the fund over time. It is important to note that NAV per share can fluctuate based on changes in the value of the fund’s underlying assets and liabilities.
Let’s say the fund has the following assets and liabilities:
Total value of assets (stocks, bonds, cash, etc.): 10’000’000
Total value of liabilities (expenses, debts, etc.): 1’000’000
Number of shares outstanding: 500’000
To calculate the NAV per share, you would follow these steps:
Overall, understanding the structure and mechanics of OEICs and SICAVs is an important step for those looking to diversify their portfolios.
Please note that all content within this article has been prepared for information purposes only. This article does not constitute financial, legal or tax advice.