An Open-Ended Investment Company (OEIC) is a collective investment vehicle that pools your money with other investors.
An OEIC is a company in its own right, so when you invest money in an OEIC you buy shares in that company. As OEICs are open-ended vehicles (unlike investment trusts), the OEIC will issue (or redeem) shares on a regular basis in response to investor demand. This will then increase or reduce the overall size of the fund accordingly.
The OEIC fund’s value is directly linked to the performance of its underlying financial assets – when their value increases, your shares grow in value too. Of course, if these financial assets go down in value then so too does the value of your shares.
As the OEIC pools money from several investors, this larger size allows the fund manager to invest in a greater variety of financial assets (company shares, government or corporate debt or other types of financial investments in global markets). Additionally, this greater size will allow economies of scale in relation to the cost of investing in financial assets.