No Trail shares?

freemoneyrocks

Hi All

Sorry if this is a bit of a basic question but I can't find the answer online.

What are 'no trail' shares? I'm looking at starting to invest in another invesco perpetual fund and you can invest in various variants: acc, inc, no trail acc and no trail inc.

I'm familair with the acc and inc concepts but what on earth is 'no trail'? It seems to make a substantial difference to the share price (sometimes higher, sometimes lower)!

Thanks

Rollinghome

In addition to the initial sales commission, retail unit trusts and OEICs usually pay an ongoing annual commission payment to advisers called the "trail". Typically it will be 0.5% pa but can be more or less. " No trail" funds don't pay that annual commission so the amc will be lower.

jem16

Out of the annual management charge which is typically 1.5%, 0.5% is usually paid to the IFA who placed the business. This is known as trail commission.

If you buy the fund through Hargreaves Lansdown for example they rebate around half of the trail commission.

freemoneyrocks

Rollinghome wrote: »

In addition to the initial sales commission, retail unit trusts and OEICs usually pay an ongoing annual commission payment to advisers called the "trail". Typically it will be 0.5% pa but can be more or less. " No trail" funds don't pay that annual commission.

So presumably a no trail share would normally be more expensive as it has to pay out commission?

Does it make any difference to me the investor?

As at today, Invesco's High Income fund (acc) shares stand at £19.54 each, but Invesco's High Income fund (no trail) (acc) shares stand at £1.05! A huge difference??

Rollinghome

freemoneyrocks wrote: »

So presumably a no trail share would normally be more expensive as it has to pay out commission?

Does it make any difference to me the investor?

As at today, Invesco's High Income fund (acc) shares stand at £19.54 each, but Invesco's High Income fund (no trail) (acc) shares stand at £1.05! A huge difference??

No the annual charges by the fund manager, the amc, will always be cheaper as it doesn't include commission. The compounding effect makes a huge difference in favour of the investor over the years.

Normally you'd only be offered the no trail version by fee based advisers, not IFAs selling on commission, but in a few cases the no trail option is available by dealing directly with the fund managers. Sometimes they'll require a higher minimum investment.

After 2013 the FSA will ban all commission payments by fund managers to IFAs.

The difference you've seen in price is probably because the no trail version was started some time after the standard trail paying fund.

dunstonh

As at today, Invesco's High Income fund (acc) shares stand at £19.54 each, but Invesco's High Income fund (no trail) (acc) shares stand at £1.05! A huge difference??

They had different launch dates. So, the unit price is not a comparison. (May 07 for no trail and Apr 99 for Acc units and Jan 95 for income units).

So presumably a no trail share would normally be more expensive as it has to pay out commission?

Depends on the platform you buy it from. it will effectively be obsolete in 2 years time as well as natural trail will be gone to be replaced explicit charging.

freemoneyrocks

Thanks all - that makes some degree of sense.

Another newbie question - Invesco detail their funds in terms of the NAV (I assume the net asset value) and also detail the % Yield. How does the yield relate to the quoted historic growth rates of the funds?