455.This section defines an open-ended investment company. This is done by reference to a  “property” and an “investment” test (set out in subsections (2) and (3) respectively). Both tests must be satisfied in order for a corporate body to meet the definition of an open-ended investment company. The “property” test is carried over from the definition in section 75(8)(a) of the FS Act 1986.
456.The “investment” test is framed by reference to a hypothetical reasonable investor’s expectations, were he to participate in the scheme. A reasonable investor should expect to realise his investment within a reasonable period, and expect that the way in which this would be done would be calculated by reference to the value of the scheme property. In determining whether this condition is satisfied, certain actual or potential redemptions of his holdings are to be ignored, including those under certain provisions of the Companies Act and corresponding provisions in EEA states.  Under subsection (4)(d), the Treasury may by order designate provisions in non-EEA states under which redemptions may be made and which may also be left out of the account.
457.Subsection (5) contains a Treasury order-making power to amend the definition of an open-ended investment company for the purposes of Part XVII.
Commentary on Sections Part Xvii: Collective Investment Schemes Chapter I: Interpretation Section 236: Open-ended investment companies