Funds & wrappers
Mutual fund
Also called Open-ended fund, OEIC or Unit trust
A fund that creates and cancels units on demand, priced once a day at net asset value.
How it works
Open-ended funds deal at a single daily price. Buy or sell and the fund itself creates or cancels units, so the price always equals the value of the underlying assets per unit.
That structure is simple and it means the fund must hold cash, or sell holdings, to meet redemptions.
Where it misleads people
Because you deal at a price set later in the day, you place an order without knowing the price you will get. Forward pricing surprises people used to trading shares.
Related terms
- Net asset valueThe value of everything a fund owns, minus what it owes, divided by the number of units.
- ETFA fund whose shares trade on an exchange throughout the day like an ordinary share.
- GatingA fund limiting or suspending withdrawals because it cannot sell holdings fast enough.
- Cash dragThe return lost by holding cash in a fund or portfolio rather than being fully invested.
- FundA pooled vehicle where many investors’ money is managed together under one strategy.
More in Funds & wrappers
- Leveraged ETF
- Performance fee
- Investment trust
- Portfolio turnover
- Index fund
- Premium and discount
- Index
- Private equity
All 25 Funds & wrappers terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.