Types of Bonds
Bond and Bond Funds
Bond Unit Trusts, OEICs and SICAVs
Investors in unit trusts, which are operated by investment management companies, receive units in a fund, the price of which are calculated on a daily basis (value of the portfolio of the fund divided by the number of units). There are different categories of legal forms of these funds found in Europe.
An OEIC (pronounced “oik”), Open Ended Investment Company, is available to investors across Europe. OEICs have one single, same price per share or unit and like unit trusts provide an opportunity to invest in a broad selection of bonds. OEICs are also known as ICVCs or Investment Company with Variable Capital. The terms ICVC and OEIC are used interchangeably.
In some countries in Europe, especially Luxembourg, Switzerland, Italy and France, SICAVs, société d’investissement à capital variable, or investment company with variable capital is the main type of open ended fund. The value of the fund’s investments is divided by the number of outstanding shares; an investor can ask that his shares be cashed out at any time. A fonds commun de placement (FCP) is similar to a UK unit trust and can be a stand alone fund or an umbrella fund.
Some investors in Europe and in the UK may have invested in unit trusts or OEICs due to efforts to create favourable tax considerations. In the UK, these investments and any reinvestment (of interest earnings or principal or both) may be tax-favourable provided they are invested as part of an ISA (Individual Savings Account). Tax treatment varies by country and jurisdiction so consult your tax advisor.