Bond fund - reduction in yield

Surreyboy

I was planning to invest in the Artemis Strategic Bond fund, in my III isa, and I was planning to choose the quarterly income accumulation class (partly because I don't need the income now and iii charge a small amount to reinvest the income). But when doing some research on the Bestinvest website I saw that the reduction in yield is higher for the QI share class that the MI (monthly distribution) shareclass. Is anyone aware of any reason why this might be the case? The TER is the same for each.

I don't want to pay more charges than I need to!

Thanks guys.

http://www.bestinvest.co.uk/investment-research/fund-research/fact-sheet/artsbqi/artemis-strategic-bond-qi/overview

Your_Hero

Surreyboy wrote: »

I was planning to invest in the Artemis Strategic Bond fund, in my III isa, and I was planning to choose the quarterly income accumulation class (partly because I don't need the income now and iii charge a small amount to reinvest the income). But when doing some research on the Bestinvest website I saw that the reduction in yield is higher for the QI share class that the MI (monthly distribution) shareclass. Is anyone aware of any reason why this might be the case? The TER is the same for each.

I don't want to pay more charges than I need to!

Thanks guys.

http://www.bestinvest.co.uk/investment-research/fund-research/fact-sheet/artsbqi/artemis-strategic-bond-qi/overview

If you are investing on iii, why are you concerned about the reduction in yield from bestinvest? These reflect the charges for the provider in question which may not apply to you if you use iii?

Anyway, the difference in reduction in yield is because their charges are slightly different:

QI - Fund Charges
Standard Initial charge 0.00%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 1.74%
Annual management charge 0.50%
Total expense ratio 0.59%
Reduction in yield (10yr) 0.76%

MI - Fund Charges
Standard Initial charge 1.00%
Initial charge via Bestinvest 0.00%
Additional bid/offer spread 0.75%
Annual management charge 0.50%
Total expense ratio 0.60%
Reduction in yield (10yr) 0.67%
http://www.bestinvest.co.uk/investment-research/fund-research/fact-sheet/artsbqi/artemis-strategic-bond-qi/overview
http://www.bestinvest.co.uk/investment-research/fund-research/fact-sheet/artsbi/artemis-strategic-bond-mi/overview

bowlhead99

If you look at Trustnet http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=URF03&univ=O
they are showing the MI version reporting a slightly better yield by 0.05% despite the same headline OCF. The price spreads as of yesterday also seem consistent between classes at about the 1.75% level (of course if your platform discounts that by a percent you may do better)

Morningstar show the 12 month yield better by only 0.01% for MI.

I would speculate that the only real reason for difference between the quarterly vs monthly distributions would be to do with cashflow management (i.e. timing of how long the cash is invested vs sitting idle before or after distribution dates and how that has interacted with the ups and downs of market performance during those dates?). In this year it made a small difference and put MI ahead.

If you are not looking to take an income and don't want to manually reinvest income paying a fee for the privilege, then as you say, you might as well get the ACC version ; so then it is just a toss up between monthly vs quarterly notional distributions, and you're not worried about getting three times as many data points for your tax calcs because you're in an ISA, so I guess just pick whichever one performed best last year which seems to be Monthly.

planteria

is it a case of the more regular the dividends, the more compounding occurs, so opting for the most regular dividend possible is the wise decision, accepting that if the unit price happens to be lower, on average, when the quarterly dividend would be paid, you would be worse off?

Surreyboy

Thanks for your help guys.

Does the fund platform make a difference to reduction in yield? I thought that riy was just a more accurate reflection of charges than the TER. It doesn't include the platform fee does it?

Unlike with the quarterly distribution, there doesn't appear to be an 'accumulation version' of the monthly distribution (at least not through iii), so I suppose it is just a toss up between the quarterly distribution accumulation version (where I don't have to pay the iii reinvestment of income charge, which is quite low anyway at 1%) or the monthly income version where the riy is lower/performance a bit better?

Thanks