How do ETFs, OEICs and investment trusts differ?

Each of the three collects money from many investors and puts it into a spread of holdings, chosen by a manager or set by an index. What differs is the legal form around that pool. That changes how you buy and sell, which price you get, and what can make the price move.

An OEIC (open-ended investment company) is set up as a company that issues shares; a unit trust is set up as a trust, with a trustee, and issues units. Both are open-ended: shares or units are created when money comes in and cancelled when it goes out.

An ETF (exchange-traded fund) is a fund whose shares are listed on a stock exchange. Investors do not deal with the fund itself: dealers called authorised participants deal with it directly, creating and cancelling shares, and everyone else buys and sells on the exchange.

An investment trust is a public limited company listed on the stock exchange. It is closed-ended, with a fixed number of shares in issue at any one time, and like any other plc it has an independent board of directors.

OEIC shares and unit trust units are bought from and sold back to the fund manager, usually through a platform. The order is placed before the price is known: FCA rules require every deal to be at a forward price, worked out at the next valuation point after the order. The rules set a minimum of two regular valuation points a month, and one every business day for higher volatility funds; each fund’s documents give its own valuation point.

ETF and investment trust shares are bought and sold on the stock exchange, through a platform or broker, at the market price while the market is open. The price is visible before dealing, and there is a gap between the buying and selling price, called the spread.

An OEIC’s or unit trust’s price comes from the value of its holdings at the valuation point, divided among its shares or units. A single-priced fund has one price for buying and selling. Under FCA rules a dual-priced fund values its holdings on two bases, one for issuing units and one for cancelling them, so its buying price is higher than its selling price.

An ETF’s market price is set on the exchange. Unlike an investment trust, an ETF can issue and cancel shares through authorised participants, and HMRC describes ETF shares as generally trading at a price that mirrors the fund’s performance. Small gaps from the value of the holdings remain, and the spread is part of the cost of dealing.

An investment trust cannot create or cancel shares to meet demand, so its share price is set by supply and demand for the shares. The net asset value (NAV) is the value of everything the trust owns, less liabilities such as debt. A trust whose share price is above its NAV per share trades at a premium; below it, at a discount. With a NAV of 100p and a share price of 90p, the discount is 10%. If the discount widens, a shareholder can lose money even when the holdings have not fallen in value.

Investment trusts can borrow money to invest more, which is called gearing. Gearing makes gains larger when the holdings rise and losses larger when they fall.

To be treated as an investment trust for UK tax, a company must be approved by HMRC and meet conditions in the Corporation Tax Act 2010: all, or substantially all, of its business must be investing its funds in shares, land or other assets with the aim of spreading investment risk, and its ordinary shares must be admitted to trading on a regulated market.

UK-authorised OEICs and unit trusts, and ETFs set up as UCITS funds, follow rules on how concentrated they can be and what they may hold. The glossary entry on UCITS explains the framework.

Every fund has running costs taken from its assets, published as the ongoing charges figure (OCF) or, for many ETFs, a total expense ratio (TER). Fundology shows each fund’s ongoing charge in pounds on £10,000. On top of that:

HMRC’s list of qualifying investments for a stocks and shares ISA includes shares and securities in qualifying investment trusts, units or shares in UK UCITS and recognised UCITS funds, qualifying non-UCITS retail schemes, and funds under the overseas fund regime. Income and gains from investments in an ISA are not taxed, and up to £20,000 can be paid into ISAs in 2026/27.

Whether a particular fund is offered in an ISA or a SIPP is up to the platform or pension provider.

Most ETFs on the London Stock Exchange are not UK funds. Of the 2,442 ETFs with a London closing price in Fundology’s data in the two weeks to 09/10/2026, 1,756 were domiciled in Ireland and 501 in Luxembourg.

For UK tax, a fund based outside the UK is an offshore fund. Outside an ISA or pension that matters when the holding is sold: whether the fund has UK reporting fund status decides whether a gain is taxed as a capital gain or as income. The guide to offshore funds and reporting status explains the rule.

FSCS investment protection is about firms, not fund structures. It can pay up to £85,000 per eligible person, per firm, for authorised firms that failed after 01/04/2019, but only if both the firm and the activity were authorised. The FSCS says its protection varies by type of product and some investment products are not protected at all, so it suggests asking the firm under what circumstances you would be protected if it failed.

No compensation scheme covers a fall in the value of investments. Capital at risk. Past performance is not a guide to future returns. The value of investments can fall as well as rise.

Prices for ETFs and investment trusts are London Stock Exchange closing prices from TradingView, at least 15 minutes delayed; prices and charges for Vanguard’s OEICs come from Vanguard. Returns for investment trusts are the change in share price, which leaves out dividends paid out. Fundology’s categories group funds by what they invest in; investment trusts have a category of their own.