Guide to Pooled Investments

The value of investments, and the income from them, can fall as well as rise and you may not get back the full amount you invest.

Unit trusts, OEICs and investment trusts. Pooled Investments. Learn more.



Collective Investments, Funds, Unit Trusts, Investment Trusts, Managed Funds, Pooled Investment, Exchange Traded Funds (ETF) and Open Ended Investment Companies (OEICs) are all the names given to investments where several people invest (varying amounts of money) into an investment.

A fund manager 'pools' together the money of many investors and uses this collective amount to invest in a range of underlying investments on behalf of the investors. The fund manager will invest the money in the asset classes they believe will deliver the fund investment objective. You can manage risk by spreading your investment across a range of investments.

A fund manager determines the best investment for the fund, monitors the investment progress and decides when to buy and sell the shares. This reduces the administration that you are required to carry out. Pooled investments allow a fund manager to bulk buy the investments and therefore save you money.

There is a wide range of pooled investment types. The three main types are:

  • Unit Trusts & Open-ended Investment Companies (OEICs): the units increase as the number of investors increase but decreases as investment decreases. Many Unit Trusts have re-structured as OEICS, the main difference between the two is that an OEIC only has one price whereas a Unit Trust like a share has two, a buying and selling price.
  • Investment Trusts: this type of investment is closed ended – where the number of units remain the same no matter how many people invest.
  • Investment Bonds - are written under Life Insurance legislation, and are in form life insurance policies. The life insurance element of these products is generally minimal (usually 101% of the investment). The insurance funds in which premiums are invested are subject to life company taxation, therefore meaning no further tax liability on returns for basic rate tax payers. Higher rate tax payers may have a further liability.

A pooled investment is where your money is pooled together with that of others and invested in a variety of assets. This is what a Fund Management company does when it invests on behalf of a large group of people.

Pooled investments provide a low cost method of getting a good spread of investments. For example, the costs of creating a good spread of investments could be too high for an individual investor but the pooled investment shares the costs and widens the choice. It makes stock market investments more accessible and affordable.

Pooled investments vary in risk but all are capable of losing as well as making money. Often, the names will give a clue to the risk level – for example Cautious Managed Fund

You’ll find details of Fund Management Companies in most newspapers and specialist publication. In addition to checking out the risk profile and fund objectives also look out for the fund management charges. Find out more about Pooled Investments in the Learning & Research section of natweststockbrokers.com


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