LONDON hopes to retain its position as Europe's premier investment management centre with a new type of fund to be introduced next year.
The new funds, to be called Open Ended Investment Companies (OEICs), will combine elements of unit trusts and investment trust companies.
Unit trusts are permanently open to new money, while investment trusts close to new shareholders after their initial offer period.
OEICs will be able to borrow as investment trusts can. But their major advantage will be single pricing, similar to a unit trust, which will be set by the management company to reflect the value of the underlying assets of the portfolio.
Because closed-end funds like the £500 million sterling KEPIT - Kleinwort's embattled European privatisation trust - may trade at a premium or discount to the net value of their underlying assets, they are vulnerable to takeovers. Single pricing would preclude this.
KEPIT, introduced in 1994, performed poorly and slumped to a discount to its net assets prompting a flurry of restructuring proposals from rival fund managers - not to mention Kleinwort Benson Investment management, its current managers.
OEICs will probably arrive too late to influence the outcome of the battle for KEPIT, however.
After extended consultation with the funds industry, the British Treasury has published draft regulations on OEICs, expected to be passed by parliament and come into force on January 6th, 1997.
The Association of Unit Trusts and Investment Funds (AUTIF) will be the industry association for the first wave of OEICs. The Securities and Investment Board (SIB) will be the regulator.
