Chartered Institute of Stockbrokers (CISI) Professional Practice Exam

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How are unit trusts and OEICs priced?

Based on investor demand
At a fixed rate determined by the fund
Directly based on the value of the assets
According to past performance

The correct answer is: Directly based on the value of the assets

Unit trusts and Open-Ended Investment Companies (OEICs) are priced based on the net asset value (NAV) of the underlying assets within the fund. The NAV is calculated by taking the total value of the assets held in the fund, subtracting any liabilities, and then dividing this figure by the number of shares or units in circulation. This valuation reflects the true worth of the fund's holdings at a specific point in time, enabling investors to buy or sell their units based on the real-time value of the assets. The pricing process for these investment vehicles is typically done at the end of the trading day, which provides an accurate representation of the fund's performance based on current market conditions. This mechanism ensures that investors are transacting at a price that corresponds directly to the value of the assets held within the fund, making it a fair and transparent pricing model.