Chapter 7: Pricing, Dealing & Settlement (4) Flashcards
(25 cards)
What are prices at which AUT and OEICs are bought and sold at based on?
Based on the value of the fund’s underlying investments - net asset value.
Authorised fund managers can quote prices which can be either…
- Single priced
- Dual priced
What is Single Pricing?
Use of mid-market prices of the underlying assets to produce a single price.
What is Dual Pricing?
Using market’s bid and offer prices of the underlying assets to produce separate prices for buying and selling of shares/units in the fund.
What pricing do AUT’s use?
Dual pricing
What pricing do OEIC’s use?
Single pricing
What’s a Dilution Levy?
Additional charge levied on investors buying or selling units in a single-priced fund to offset any potential effect that large purchases or sales can have on the value of the fund.
What price is prescribed by the FCA?
Maximum buying price
What is the Maximum buying price?
The maximum price at which the fund manager is able to sell new units.
What does the Maximum buying price comprise of?
Under dual pricing, comprises the creation price + fund manager’s initial charge.
What is the creation price?
The price the manager must pay to the trustee to create new units, which broadly consists of the value of the underlying investments and an allowance for dealing costs.
What’s the Selling price?
The price at which the fund manager will repurchase units.
What’s the Minimum price (or cancellation price)?
The price received from the fund by the manager when they cancel the units.
What explicit charges can fund managers charge?
- Initial charge made for the investment.
- Annual management charge (AMC).
What charges that fund managers can charge are less explicit?
- Brokers’ commission for trades undertaken.
- Legal and audit fees.
- Fees for specialist taxation advice.
What are UCITS funds required to publish?
An Ongoing Charges Figure (OCF) and quote this in the key investor information document (KIID).
What does OCF figures include?
All types of expenses incurred by the UCITS, such as…
* Costs of UCITS management company
* The depositary
* The custodian
* Any investment adviser
* Costs of outsourced services
* Registration fees
* Regulatory
* Audit fees
* Payments to legal and professional advisers
What charges do OCFs not include?
Don’t include initial, exit charges or performance fees.
What do other funds also publish with regards to charges?
Total Expenses Ratio (TER).
What does the TER consist of?
The TER consists of the AMC and other charges.
What other charges are in the TER document ?
Fees paid to…
* Trustee
* Depositary
* Custodian
* Auditors
* Registrar
Which ways can investors buy and sell units?
- Directly with the fund manager
- Via their broker or financial adviser
- Through a fund supermarket or platform
How can investors buy or sell units?
- Directly with fund manager
- Via their broker or financial adviser
- Through a fund supermarket
Is there a secondary market for units or shares?
No, can only trade between investors and the fund manager.
