Exit costs from funds - how much ?

property.advert

There is a lot of very useful discussion on the costs to enter funds, the ongoing costs and the various commissions and rebates etc. but given that fund investments are likely to be reasonably long term investments (or why enter them) and you expect their value to rise, the costs to exit a fund seem to be rather overlooked.

Say you want to liquidate a fund to cash, how can you monitor the value in as near to real time as possible, what are you likely to lose on exit and how can you minimise these losses, perhaps in the way that you enter the fund ?

What would really upset me would be to have say a valuation of £50k in a fund and then find they have applied some exit charge or other balancing item or some fictitious "spread" and suddenly your £50k has shrunk to £48k or whatever.

I'm trying to get a handle on the total cost of ownership so to speak.

sabretoothtigger

unit trusts dont usually have exit fees. ten years ago some did

Theres a spread to buying and selling quite often. Sometimes theres a dealing fee, otherwise you are free. Also the final price is not given till afterwards unless you buy the fund as a share

turbobob

Yes, years ago I know at least some had a sliding scale exit fee (5% in year 1, 4% in year 2 etc.) but fortunately that is not common now. In nearly all cases now when you sell you will get the bid value of units with no deductions.

datostar

turbobob wrote: »

Yes, years ago I know at least some had a sliding scale exit fee (5% in year 1, 4% in year 2 etc.) but fortunately that is not common now. In nearly all cases now when you sell you will get the bid value of units with no deductions.

M&G still operate a scheme like that. You can opt for no initial charge and accept the exit fee which will be zero after 5 years so OK if you intend to sit on the funds. If you pay the initial charge there's no exit fee. I think most of their funds are OEICs now so there's a single price - no bid/offer spread.

turbobob

Indeed, that is M&G's Class X units. If you buy them through a discount broker (e.g H-L) who don't take the initial commission I understand they don't have the exit fee attached.

Loughton_Monkey

property.advert wrote: »

Say you want to liquidate a fund to cash, how can you monitor the value in as near to real time as possible, what are you likely to lose on exit and how can you minimise these losses, perhaps in the way that you enter the fund ?

What would really upset me would be to have say a valuation of £50k in a fund and then find they have applied some exit charge or other balancing item or some fictitious "spread" and suddenly your £50k has shrunk to £48k or whatever.

I'm trying to get a handle on the total cost of ownership so to speak.

I think most people consider these charges to be an "entry" cost, not an exit charge. In the case of OEICS, it is patently an entry fee, because you pay (say) 5% on top of the single unit price. For Unit Trusts, you buy at the offer price, but once bought, they can only be correctly valued at the bid price, which is (say) about 5% lower. So you have 'lost' 5% one millisecond after buying them.

So to value your fund(s) accurately, just use one of the many on-line Portfolio Tools. Feed in the number of units and it will give you a very accurate value every day. This will be based on the bid price (for UT) or the single price for OEICs.

There is then only one other factor that will affest the actualy value. And that is the 'forward pricing' rule. So if your fund was valued at exactly £48K and you placed an order to sell, you would get tomorrow's price - which will either be higher or lower, depending upon how the prices have moved, but any such difference is not a 'charge'.

Most of us buy through HL, or similar, where there is generally no up front (or exit) charges at all. Just ongoing management charges.