Unit Trust and OEIC Diversification Rules

Question 1

Unit trusts and OEICS must be sufficiently diversified. What is the maximum holding of share value of any one company, for a UK UCITS fund investing broadly in securities that is not an index-tracker?

Answer 1

10%

Question 2

A fund consists of 100% UK gilts and is valued at £500m. To stay within the diversification rules, a single stock within the portfolio could be worth as how much?

Answer 2

£150m (30% for fixed-interest securities)

Question 3

Unit trusts and OEICS must be sufficiently diversified. What is the maximum holding of share value of any one company, for a UK UCITS fund investing broadly in securities that replicates an index?

Answer 3

20% but up to 35% in exceptional circumstances

Question 4

What are the 3 diversification rules for a fund that holds shares in one company at 10% of the total value of its fund?

Answer 4

1. Only 4 separate shareholdings, max. 10% holding each (40% on aggregate)
2. Any other shareholding must not exceed 5% of the fund
3. Minimum of 16 holdings

Question 5

Maximum holding for the securities or money market instruments issued by the same group in a UK UCITS fund? And why does this limit exist?

Answer 5

20% - prevention of overexposure of fortunes

Question 6

For funds investing more than 35% in government fixed-interest securities, issued by a single issuer, are required to invest in at least how many different issues of stock?

And what is the maximum single stock holding?

Answer 6

6 stocks
30% holding

Question 7

1. UK UCITS schemes
2. UK non-UCIT schemes

Max. holding of unapproved securities and max. holding of units in another collective investment scheme?

Answer 7

10% and 20%
10% and 35%

Question 8

How much of a unit trusts funds are typically held in cash?

Answer 8

5%

Question 9

The IA says that there is a maximum cash holding for any unit trust, of how much?

Answer 9

20%