Experiencing my first mini dip as a new(ish) investor

Yes, that's reasonably standard functionality with most providers working with open-ended funds on a platform.

If you have £10000 of Fund A - as soon as you place an order to redeem out £9000-worth of fund A units, the platform operator will know that he is going to request the redemption of £9000-worth of units from Fund Manager A at the next dealing point and then he knows the £9000 will be settled into your account in X business days from that point. So, he knows that if you also request to subscribe to Fund B for £9000, that order will go to Find Manager B at the next dealing point and also need to be settled in X business days thereafter. If he knows you have £9000 being received into your account on that day, which will be available to cover it, there's no real risk in placing the trade.

So, as soon as the Fund A order is placed, the Fund B order could be placed (assuming B and A have similar cut off times and settlement periods).

Whereas, if you say you have £10000 worth of Fund A and want to cash in £10,000- worth, you can't place a matching order to buy £10000 of Fund B - because the ISA manager doesn't know that you'll really be able to honour that £10,000 payment because if the price of Fund A drops 3% at the next dealing date, the proceeds you'll receive will be only £9700 and you won't be able to afford the £10000 Fund B subscription you contracted for. In such a case you'd have to wait to hear the contracted sales proceeds before you could trade with it, and then you'll lose a day out of the market.

So, usually with daily forward-priced funds, there is some level of value you can trade without knowing how much money per unit you're going to get from your existing holdings that you've ordered to be sold. Like, if you've put an order in to sell £9k or £10k of an £11k holding, you will probably be successful and be able to get at least that much proceeds and so you can freely book a £9k purchase to settle the same day - no days out of the market. But if you tried to place a £10k order (91% of your last reported holding value) it might be tight, and an £11k order based on a hoped-for £11k of redemption value is too risky if the platform manager doesn't want to take on the risk himself.

There are some providers that will pre-fund your subscriptions and take on a small amount of liquidity risk themselves (generally not the cheap DIY platforms). They can sometimes do that with pension contributions too, eg they know you'll be receiving £x of tax relief in the future and are willing to front the money from their own bankroll while waiting.

aroominyork wrote: »

Nope, because you are placing an order to switch part of Fund A to Fund B; not to sell Fund A and merge its proceeds with your cash account before buying Fund B.

I don't understand the comment "merge its proceeds with your cash" as if that is some unusual or complex technique that needs a special request. New subscriptions into funds need to be settled in cash, on the settlement date which is a few days after order acceptance. It doesn't matter if that cash is cash that's already in the cash account going into the settlement date, or cash that arrives there on the settlement date from a fund exit or share sale.

As explained above, they would be willing to let you fund a £9k purchase of Fund B with a £9k sale of Fund A (out of your £10k holding of Fund A), because they know there is no material risk that you wouldn't have the £9k available from the A sale on the settlement date for the B purchase.

That's because the only way you wouldn't be able to get as much as £9k from A is if it dropped to less than 90% of its value by the next dealing date. So, they'll let you place a trade using that £9k of redemption proceeds that you ordered from A.

If you already have £1k of cold hard cash as cleared funds in your cash account on the platform then there should be absolutely no problem buying £10k of B using the £1k cash which is sitting there before settlement date and the £9k cash which becomes available on settlement date from the A redemption.

aroominyork wrote: »

Agreed, bowlhead, as two separate Fund B purchases of £9k and £1k, but that's not the scenario Audaxer described.

What he described was:
"If in that example if you already had say £1k of cash sitting in your account, would they be able to put the £10k sale of Fund A and £10k purchase of Fund B at the same time?"
Given we are agreed you can take £9k out of A and put it into B at the same time, and there is also £1k of cash available as a buffer which can be used to buy £1k of B at any time you like, we know you can buy £10k of B all at the same time. He didn't say it has to be done in a single click...

You may of course not get a full £10k from the A disposal because we don't know what the A shares will be sold for.... but you know you'll definitely be able to get £10k of B at the next dealing point from now because you have cash plus a disposal to fund it.