Who buys back funds?

antio

Hello,

I have a self-invest stocks&shares ISA and have managed to get good returns - mostly by buying and selling when I got the returns I expected, then buying again etc..

I started investing more money and there is a fundamental question I never considered really: who buys the funds when you want to sell? I like to diversity and have some 'exotic' funds, but I saw a notice somewhere that I might not be able to easily sell some funds for reasons I can't quite remember (I know, I should have read that better). I've never had trouble selling so far - my orders get executed after 2-4 days.

So my question(s): who buys the funds? I get how it works with shares, but is it the same with funds? Is there a chance I might not able to sell back a fund and be stuck with it? What happens then?

Thanks in advance!
Anthony

Lokolo

Managed funds have a cash cache account for this reason. When people sell units, then fund manager buys them back. And vice versa, when people buy units, the fund manager is the one that sells them.

So they keep a capital of X units in cash.

atush

In the case of investment trust funds, they are bought and sold as shares so when you buy someone else is sellng and vis versa

antio

Lokolo wrote: »

Managed funds have a cash cache account for this reason. When people sell units, then fund manager buys them back. And vice versa, when people buy units, the fund manager is the one that sells them.

So they keep a capital of X units in cash.

Thanks for your quick reply Lokolo. So I presume if many people panic and want to sell at the same time the cache might not be enough, they might have to cash holdings, time might not be right etcetc, hence the warning.

Are they obliged to buy back? Or can they refuse indefinitely for whatever reasons?

Thanks again!

antio

atush wrote: »

In the case of investment trust funds, they are bought and sold as shares so when you buy someone else is sellng and vis versa

Thanks for the reply, good to know. I believe I only have managed funds, so I assume it's quite different. Cheers.

Lokolo

antio wrote: »

Thanks for your quick reply Lokolo. So I presume if many people panic and want to sell at the same time the cache might not be enough, they might have to cash holdings, time might not be right etcetc, hence the warning.

Are they obliged to buy back? Or can they refuse indefinitely for whatever reasons?

Thanks again!

Not sure they can refuse but there would be order problems I imagine. It's not likely to happen though.

atush

antio wrote: »

Thanks for the reply, good to know. I believe I only have managed funds, so I assume it's quite different. Cheers.

And this is another advantage of Investment trusts.

As they don't have to sell off assets if investors want their money back (ie if the Cache isn't enough). Because in recent market falls when investors are all panic selling, this can cause the unit type funds to have to dump funds/stocks instead of holding for a rebound.

Being a forced seller is never good.

antio

atush wrote: »

And this is another advantage of Investment trusts.

As they don't have to sell off assets if investors want their money back (ie if the Cache isn't enough). Because in recent market falls when investors are all panic selling, this can cause the unit type funds to have to dump funds/stocks instead of holding for a rebound.

Being a forced seller is never good.

Interesting view, hadn't thought about it that way. I agree that being a forced seller is never good, but isn't there a chance that noone might want to buy an (Investment Trust) fund, so you can't get rid of it, even at a loss?

I would see a managed fund as more attractive, because even with a loss in my capital I can still sell at any time. Otherwise I'm stuck with something no one wants to buy?

atush

In the stock market, there are always buyers for stock. But if the buyers are few, and the sellers many- the price drops. But this can widen the 'Discount' ie the difference between the net asset value of everything in the trust, and the total price of all shares. Because the shares are traded on the LSE they are in some ways more liquid and selling is a button press away.

But the fund itself, still holds what it holds and is Not forced to sell.

sabretoothtigger

JII is a managed fund that is an investment trust.


I think you are referring to ETF which are shares but mostly not managed. Those ETF operate alot like unit trusts really which are not shares and can be either trackers or managed

In the stock market, there are always buyers for stock

Not on flash crash Tuesday there wasnt. Proctor and Gamble traded for 1 cent, bargaintastic

atush

Sabre, I was talking generally- not catastrophically.

I imagine selling funds then might be harder lol.