Fund prices

[bmwmike]

Hi

I've noticed on AjBell youinvest that if I buy or sell a fund it takes a few days to go through. I didn't really pay much attention to that until I put a sell for a particular fund this week on Wednesday at a price I was happy with which was quoted on the sell page. It is still showing as "in progress" and the price has since dropped.

I'm wondering now if I'll get the price I was quoted or the price the fund is at when the sale actually happens.

Is this normal for funds? I'd assumed the price quoted is the price I'd get as with shares. I've posted a message to AJB but not had a reply yet so thought I'd try the collective PH wisdom too.

Thanks
Mike

[anonymous-user]

That's normal, broker will not make a buy for each investor instantly for funds (normally) but maybe do a few a day, prices moving all the time. At least for you the price went down Plus fund is likely built of many different funds or etfs.

[bmwmike]

1TurboTom said:

That's normal, broker will not make a buy for each investor instantly for funds (normally) but maybe do a few a day, prices moving all the time. At least for you the price went down Plus fund is likely built of many different funds or etfs.

Ugh so the price shown at the time of making the sale is irrelevant ?

It's not good for me because I was selling to cash some profit but the price has dropped. So my actual sale price presumably will be lower = less profit.

[xeny]

bmwmike said:

Ugh so the price shown at the time of making the sale is irrelevant ?

Yes - if you think back to when you read the fund prospectus, it almost certainly described the fund pricing process, which typically happens once a day.

Simplifying somewhat, all orders up until a certain point (typically a couple of hours before the pricing time) are transacted when the fund is priced, and you get that price. Order received after the deadline are transacted at the next pricing point.

This is one of the reasons ETFs exist as a separate thing to OEICs, and yet another reason why funds (along to be honest with all equities) are recommended as pretty long term investments.

[WindyCommon]

If you could post the name of the fund and the time you placed your order I’ll give you an accurate answer together with an explanation.

[bitchstewie]

I've also ran into this on buys before. Only advice I can give is get in as early in the morning as you possibly can as that way you should at least hit their internal deadline for bundling deals together.

I've had one fund appear the evening of the day I ordered it and other (much bigger) funds appear three days later.

[bmwmike]

xeny said:

Yes - if you think back to when you read the fund prospectus, it almost certainly described the fund pricing process, which typically happens once a day.

Simplifying somewhat, all orders up until a certain point (typically a couple of hours before the pricing time) are transacted when the fund is priced, and you get that price. Order received after the deadline are transacted at the next pricing point.

This is one of the reasons ETFs exist as a separate thing to OEICs, and yet another reason why funds (along to be honest with all equities) are recommended as pretty long term investments.

Right on. I knew pricing happens once per day.

That's why I thought if I sell a fund on Wednesday as 100p I'd get 100p even if the transaction itself is still "in progress" on Monday, I still want the 100p.

However I looks to me like I'll be getting the once per day pricing on the Monday or Tuesday of the now 90p once the transaction goes through...

[bmwmike]

WindyCommon said:

If you could post the name of the fund and the time you placed your order I’ll give you an accurate answer together with an explanation.

Thanks. The fund is Aberdeen Global Indian Equity X Acc GBP. Sell order was placed
03/05/2018 09:35:54.

Thank you.

ETA yes I know the 3rd was a Thursday not a Wednesday as I said in OP but it was early (for me) so the price was possibly wednesdays. I'm not great with dates n stuff.

[xeny]

bmwmike said:

That's why I thought if I sell a fund on Wednesday as 100p I'd get 100p even if the transaction itself is still "in progress" on Monday, I still want the 100p.

However I looks to me like I'll be getting the once per day pricing on the Monday or Tuesday of the now 90p once the transaction goes through...

Best case you'll get the next days pricing, and in cases where the broker bundles orders then you may get a few days later which I agree is a PITA - I don't know of a way of getting the "current" price.

[bmwmike]

xeny said:

bmwmike said:

That's why I thought if I sell a fund on Wednesday as 100p I'd get 100p even if the transaction itself is still "in progress" on Monday, I still want the 100p.

However I looks to me like I'll be getting the once per day pricing on the Monday or Tuesday of the now 90p once the transaction goes through...

Best case you'll get the next days pricing, and in cases where the broker bundles orders then you may get a few days later which I agree is a PITA - I don't know of a way of getting the "current" price.

If I agree to sell the funds at X I should get X not .9 or 1.1 of X. Trading standards not apply to funds?

[KenC]

bmwmike said:

If I agree to sell the funds at X I should get X not .9 or 1.1 of X. Trading standards not apply to funds?

You are not agreeing to sell at X. You are agreeing to sell at a pre agreed point in the future in accordance with the fund documentation that you accepted when buying. This is a heavily regulated industry and all is above board.

[WindyCommon]

The Aberdeen Global Indian Equity fund is an open-ended fund that is priced daily at 13:00 UK time. Dealing in the fund will be on a forward priced basis - that is your transaction will be dealt at the next available price and pricing point. Ahead of this will be a cut-off time determined by the platform or broker that you are using; this is the point at which they aggregate all the deals they have received before transacting with the fund manager itself. Typically this will be 2 hours ahead of the pricing point for the fund in question. Please ignore earlier posts suggesting that transactions may be aggregated over a few days - there are hard regulatory requirements to the contrary.

As you dealt on your platform at 09:35 on May 3rd, I would expect your transaction to have been dealt with the fund manager at the 13:00 pricing point That same day. This would normally mean that you would receive a contract note on May 4th showing execution at the 13:00 May 3rd price.

If your transaction wasn’t dealt on May 3rd you should ask your broker/platform what their dealing cut-off time is. To the best of my knowledge all of the major platforms would expect to transact an 09:35 order in a 13:00 priced fund on the same day. If your deal was placed before their stated cut-off point, but not dealt that day you will be able to insist that they adjust accordingly. If their cut-off time is prior to 09:35 you could reconsider whether another platform would be a better choice.

Why is forward pricing the norm? Well - if you had historic pricing, you could deal at yesterday’s prices with perfect hindsight. So if the (say) US market opened 2% up, you could place a large order knowing that you’d be 2% up immediately. Your +2% would have to come from somewhere, the only somewhere being existing investors in the fund. So the forward pricing method ensures that everyone (buyers and sellers) transacting on a particular day is treated fairly.

Edited by WindyCommon on Sunday 6th May 21:28

[LeoSayer]

This is the way most investment funds work for the reasons mentioned above.

So tell them to sell, say, £5,000 worth if that's what you want to raise.

[bmwmike]

WindyCommon said:

The Aberdeen Global Indian Equity fund is an open-ended fund that is priced daily at 13:00 UK time. Dealing in the fund will be on a forward priced basis - that is your transaction will be dealt at the next available price and pricing point. Ahead of this will be a cut-off time determined by the platform or broker that you are using; this is the point at which they aggregate all the deals they have received before transacting with the fund manager itself. Typically this will be 2 hours ahead of the pricing point for the fund in question. Please ignore earlier posts suggesting that transactions may be aggregated over a few days - there are hard regulatory requirements to the contrary.

As you dealt on your platform at 09:35 on May 3rd, I would expect your transaction to have been dealt with the fund manager at the 13:00 pricing point That same day. This would normally mean that you would receive a contract note on May 4th showing execution at the 13:00 May 3rd price.

If your transaction wasn’t dealt on May 3rd you should ask your broker/platform what their dealing cut-off time is. To the best of my knowledge all of the major platforms would expect to transact an 09:35 order in a 13:00 priced fund on the same day. If your deal was placed before their stated cut-off point, but not dealt that day you will be able to insist that they adjust accordingly. If their cut-off time is prior to 09:35 you could reconsider whether another platform would be a better choice.

Why is forward pricing the norm? Well - if you had historic pricing, you could deal at yesterday’s prices with perfect hindsight. So if the (say) US market opened 2% up, you could place a large order knowing that you’d be 2% up immediately. Your +2% would have to come from somewhere, the only somewhere being existing investors in the fund. So the forward pricing method ensures that everyone (buyers and sellers) transacting on a particular day is treated fairly.

Edited by WindyCommon on Sunday 6th May 21:28

Thank you, great explaination. As of now the transaction is still showing as in-progress. I've already asked them why but will follow up to ask about cut off time etc.

Thanks