property funds playing dirty games

EdInvestor

In re Mr Mumble's comments, an interesting article here questioning why clients were put in unit trusts over the past 56 months when they were so overpriced compared with investment trusts.

http://www.investegate.co.uk/InvArticle.aspx?id=861

Stompa

Interesting to note that, according to the Guardian:

http://money.guardian.co.uk/weekly/story/0,,2125904,00.html

"What happened at New Star was that during two days earlier this week, the money flowing out as investors sold outweighed the cash coming in. The gap was just £5m, caused by sales by two big holders who took a profit on clients' investments after years of above-average performance."

wellsie82

the L & G property fund im in has bounced back up to what it was before the big dip last week, anyone elses property funds done the same elsewhere?

dunstonh

NU has crept back up but not back to level. Morley property fund has gone down a second time. SWIP property often does this sort of thing so i havent bothered checking. Clerical Medical didnt make any adjustments in the first place (no surprise there). I have dinner in the minute so I am not checking any more but.... I just checked L&G property fund on the stakeholder and that dropped on Friday. Check the date on your price feed as some are two days behind (MSN Money for example).

wellsie82

dunstonh wrote: »

NU has crept back up but not back to level. Morley property fund has gone down a second time. SWIP property often does this sort of thing so i havent bothered checking. Clerical Medical didnt make any adjustments in the first place (no surprise there). I have dinner in the minute so I am not checking any more but.... I just checked L&G property fund on the stakeholder and that dropped on Friday. Check the date on your price feed as some are two days behind (MSN Money for example).

nice one thanks for that and for checking/letting us know :cheesy:

dunstonh

SWIP Property has returned back to its higher price
09/07/07 - 1.3980
10/07/07 - 1.3210
12/07/07 - 1.3980
13/07/07 - 1.3220
17/07/07 - 1.3190
18/07/07 - 1.3990

If you look at the fund performance chart you will see it is not an uncommon event:
http://webfund5.finexprestel.com/FirstSoftware/fundfactsheetprint.wsp?unitcode=HSPPA

L&G hasnt returned back up again but you mentioned that it did last week but then I mentioned it dropped again. Doing this has been less common with L&G
http://webfund5.finexprestel.com/FirstSoftware/chart.wsp?unitcode=LGEPS&unittype=F&span=6&index=

mroller

Wondering if this can be an opportunity for an automatic 6% gain?
If I buy the New Star Prop fund, it will be at the discounted price, right?

If New Star revert to normal pricing then my units will go up by 6%

Have I missed something?

dipsomaniac

you will be buying at the offer price and not the cancellation price. it may be worth a punt if you get a big discount on the 5% initial charge but unit trusts/OEICS are not normally the best tool for day trading.

jamesd

mroller, the price you buy at is always above the bid price, regardless of whether the bid price is on offer or cancellation basis. You can't profit from the change between the two. All that happens is that the spread between the buying and selling price changes back to the usual 6% lower spread.

You'll see a pretty 6% rise in the chart of bid price but the rise will still leave you with no more money than you started with. Unless you already hold the units and want to sell - then you will get 6% more than last week if the fund doesn't immediately have to switch back to the cancellation price.

You may be able to profit if the underlying price of the units rises but the best bet seems to be that as soon as many people notice the price change, those who wanted to sell because they became worried will sell and that will produce sales of the shares of the stock portion of the fund on the market and reduce the underlying value. Seems likely to be better to wait for that to happen than buy now.

Or maybe there will be enough people thinking that there's a 6% profit to be made to keep the bid price on offer basis and increase the value of the underlying shares. Doesn't matter if the gain is bogus then, since the effect is real.

If it's an OEIC with a single price there could be an opportunity to profit - though if there are enough sales to cause this drop, maybe waiting is a better idea.

mroller

Sorry to be thick. let's take an example. I use HL to buy units so most of the initial commission is rebated:

New Star prop quotes now :209.99/221.03 (that's 5.25% spread)
before the change, it used to quote ~ 221/232 (also 5.25% spread)

If I buy now through HL, it's gonna be close to 209.99, right?

If New Star revert to normal pricing, I would be able to sell at close to 221p (assuming the investment didn't go up or down), right?

Of course the risk of doing this, is that the unit can still go down by more than 6% thus canceling any gain from the switch of the price. other risk is that New Star might never revert. (other risk is that when I try to buy, New Star switches to normal pricing at the same time thus preventing me to buy at the discounted price)

any thoughts welcome.