OEICs verses Unit Trusts

cepheus

I've just been calculating the cost of buying and selling Unit trusts, The spread in enormous, more than 6% in the one I was interested in. Can any of this spread be claimed back in any way? If not surely they are totally uncompetitive with OEICs. Why have they not all transferred over?

Iancfp

Unit trusts have spread OEICs have initial charge

As a professional I buy both at zero initial cost

If you go direct to fund manager you can buy either at a similar 5% cost

There is no difference in cost because a fund is constituted as UT or OEIC

masonic

Good platforms either heavily or completely discount initial charges, so in many cases anyone can buy OEICs at no initial cost. I don't think the same is true of spread, which is the point I believe the OP is trying to make. Spread certainly is offputting.

cepheus

I was wondering if it was possible to reclaim the spread in a similar way you can reclaim the initial charge on an OEIC.

I would never pay extra!

Iancfp

No platforms reduce or wipe out spread as well
its just another name for initial charge UTs have a difference in price between buy and sell OEICs have initial charge its just same -Platform either discounts the spread or the charge

xrjtg

HL's discounting system serves to eliminate the spread on unit trusts that they describe as rebating all of the initial charge. The system is essentially blind as to whether the underlying funds are unit trusts are OEICs. I'd imagine that similar considerations apply elsewhere.

masonic

Iancfp wrote: »

No platforms reduce or wipe out spread as well
its just another name for initial charge UTs have a difference in price between buy and sell OEICs have initial charge its just same -Platform either discounts the spread or the charge

In which case, the OP's questions are very pertinent. Why would anyone choose a UT over an equivalent OEIC, given the initial charge on an OIEC can be wiped out, but the spread of a UT can't? It's hard to see why they should still exist, except in niche areas or in cases of stellar performance.

masonic

xrjtg wrote: »

HL's discounting system serves to eliminate the spread on unit trusts that they describe as rebating all of the initial charge. The system is essentially blind as to whether the underlying funds are unit trusts are OEICs. I'd imagine that similar considerations apply elsewhere.

I'm not sure that's true. I hold 3 UTs in my portfolio at HL and they all have spreads of ~5%.

lpgm

Iancfp wrote: »

No platforms reduce or wipe out spread as well

I think a missing comma after 'no' has caused some confusion.

lpgm

masonic wrote: »

I'm not sure that's true. I hold 3 UTs in my portfolio at HL and they all have spreads of ~5%.

When you buy a unit trust at HL you pay the lower, bid price (or thereabouts, and assuming the price is actually fully discounted), so you don't suffer the spread.

masonic

lpgm wrote: »

When you buy a unit trust at HL you pay the bid price (the lower one), so you don't suffer the spread.

Not true. When I bought these UTs, I was immediately 5% down.

Edit: On checking my contract notes against the fund price on the date of the contract note, this is only true for one of the three UTs. The second was fully discounted and I only suffered a spread of 1% for the third. Perhaps the 'Initial Saving' listed on the overview page is applied to the offer price to arrive at the level of discount on the spread?