OEICs and SICAVs: Exploring Investment Fund Structures

“Invest for the long haul. Don’t get too greedy and don’t get too scared” ― Shelby M.C. Davis

4 min read

OIECs / SICAVs Structure of Investment Funds

OEICs and SICAVs: Exploring Investment Fund Structures

“Invest for the long haul. Don’t get too greedy and don’t get too scared” ― Shelby M.C. Davis

4 min read

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.

Keen to know more? You are in the right place!

What is an OEIC (or SICAV) Investment Fund Structure?

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.

Key Features of OEICs and SICAVs

  1. Diversification: OEICs and SICAVs offer access to a wide range of assets, including stocks, bonds, and other securities, providing diversification benefits to mitigate risk.
  2. Liquidity: Buying and selling shares in OEICs and SICAVs on a daily basis provides liquidity and flexibility when managing investment portfolios.
  3. Professional Management: These investment funds are typically managed by professional fund managers who make investment decisions based on the fund’s objectives and investment strategy.
  4. Regulation: OEICs and SICAVs are subject to regulatory oversight by financial authorities in their respective jurisdictions, which helps add a level of protection and transparency.
  5. Tax Efficiency: OEICs and SICAVs often benefit from tax-efficient structures, which can result in lower tax liabilities compared to direct investment in securities.
  6. Investor Protection: Both OEICs and SICAVs are regulated investment structures, offering protection through compliance with regulatory requirements and standards.
  7. Global Access: OEICs and SICAVs provide access to a diverse range of international markets and asset classes, allowing for global investment opportunities and portfolio diversification.

Net Asset Value (NAV) Explained

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:

  1. Subtract the total liabilities from the total assets to determine the net asset value (NAV) of the fund: NAV = Total assets – Total liabilities = 10’000’000 – 1’000’000 = 9,000,000

  2. Divide the NAV by the number of shares outstanding to find the NAV per share: NAV per share = NAV / Number of shares outstanding = 9’000’000 / 500’000 = 18

What Now?

Overall, understanding the structure and mechanics of OEICs and SICAVs is an important step for those looking to diversify their portfolios.

So, what now? Patterson Mills specialise in navigating the complexities of investment funds like OEICs and SICAVs. 

With our expertise and experience, we can help you make the investment choices that give you the best possible chance of success. Don’t wait any longer to optimise your investment strategy – get in touch with us and book your initial, no-cost and no-obligation meeting.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

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. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.