For people who are new to ISAs or collective investment schemes, the plethora of investment vehicles available can be confusing, so the aim of our Investment Classroom is to inform you about the various types of investment - ISAs, unit trusts, investment trusts, VCTs, hedge funds and a SICAV - available to you and your family, and help explain how to go about making tax-efficient investments.
Tax efficiency isn’t the only reason to invest, you should ensure that the product and fund you chose suits your investment needs, consider the risks and charges involved and if you have any questions you may need to consult an Independent Financial Adviser.
You can also look up our glossary for key terms you want to know more about, and read our frequently asked questions.
ISAs
Individual Savings Accounts (ISAs) were set up by the government in 1999 to replace PEPs. The government’s aim is to encourage people to save by offering a "wrapper" within which investments get tax advantages. Any profits or interest within the ISA are tax-free.
Unit Trusts
Unit Trusts enable investors to combine (‘pool’) their investments with other investors in a large fund. The fund holds the assets and is managed by a professional manager. Investors can choose a fund with an appropriate objective and leave the manager to make informed decisions, benefiting from the economies of scale that a pooled fund achieves.
Investment Trusts
An Investment Trust is a publicly-quoted company that invests shareholders' monies in the shares of other companies. It is a collective investment scheme with a fixed number of shares and is closed ended.
VCTs
Venture Capital Trusts (VCTs) are a tax efficient way of investing larger sums of money with the aim of creating tax-free capital gains. AiM VCTs invest primarily in companies that are listed on the Alternative Investment Market and the London Stock Exchange as well as companies listed on OFEX, the unregulated trading facility.
Hedge Funds
A Hedge Fund is a pooled investment vehicle that is privately organised and is administered by professional investment managers for investors who have experience of alternative, unregulated investments. This investment vehicle is not generally considered suitable for private investors. It is different from another pooled investment fund, the unit trust fund, in that hedge funds are able to sell securities short and buy securities on leverage, which is consistent with their typically short-term and high risk oriented investment strategy.
SICAV
A SICAV is an open ended investment company (OEIC) or an Investment Company with Variable Capital (ICVC). SICAV is an acronym for “Societe d’investissement a Capital Variable”.
Being an open ended company a SICAV must have a board of directors and shareholders. It operates in the same way as a UK OEIC, in that investors subscribe for shares which are valued regularly (usually daily).
Investing for Children
Parents, grandparents and other adults often wish to invest on behalf of children. There are various options to consider and Independent Financial Advisers can provide advice if you're considering setting up an investment scheme for someone under the age of eighteen.
