Fidelity Accumulation Fund - a scam?

AHB2019

I have a Fidelity Index UK Fund P-Acc [PIUKA], but I do not understand how the accumulation part of it works, and the Fidelity call centre cannot answer my questions. All the key investor information and fund documents are completely silent on it. My annual statement just shows the money they are taking out from it to pay their fees; there is no indication of reinvestment. If they were fully reinvesting all the dividends, I would have expected them to highlight how much has been reinvested, and what impact that has on the unit price, but they say nothing. How do I know they are reinvesting the dividends for my benefit, rather than siphoning them off? As an accumulation fund, you would have thought the fund would out perform the market, but it seems to be underperforming, which makes me even more suspicious.

Can anyone explain how this works?

Thanks very much!

le_loup

Is this a serious question?
Fidelity, one of the largest investment firms in the world is scamming you?

fun4everyone

This poster must be someone on the wind up?

NoMore

http://monevator.com/accumulation-funds-dividends/

hth

ColdIron

It's a scam, thanks for blowing the lid off

murmeltier

OP, please consider changing the subject of this thread

AHB2019

It is a serious question; although I don't think it is likely to be a scam, it is incredibly opaque. What evidence is there of the reinvestment of dividends? Why does Fidelity not provide any information about the benefits to me of the accumulation (e.g. highlighting the impact on the unit price; mentioning how much was reinvested etc) - is it just poor marketing by them?

Thank you NoMore for the only constructive answer - but I have not been able to find out from trustnet how it works on this fund. I will carry on digging, but it is ridiculous that it is this difficult.

coyrls

You can see the dividend history for the fund here: https://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=FIMNI&univ=O&typeCode=FK41T&pageType=dividends

It is not difficult to understand how it works, see the Monevator link above.

AHB2019

Thank you so much coyrls. This gives the following information:

Fidelity Index UK A
Dividend type Dividend amount Tax indicator Ex dividend date Payment date
Interim 2.563 p Dividend 01-Mar-2016 30-Apr-2016

But (please be patient with my questions!) how do I know that the dividend was entirely reinvested (as opposed to partially reinvested), and is there any way of finding out what effect the dividend reinvestment had on the unit price?

Another question: the chart shows the fund performance compared to the FTSE all-share index. Surely if it was an accumulation fund it should massively outperform the index, as it is reinvesting rather than providing an income.

Apologies if these questions are seemingly dumb.

murmeltier

(This is a very simplified answer):

The price of a unit of a fund is the sum of the values of all its underlying holdings plus the cash component divided by the number of outstanding units.

The cash component contains among other things dividends that the fund has received from its underlying holdings.

When inc units make a distribution (quarterly, annually, whenever), the cash component is reduced by the amount of cash that is paid out to the investors.

Result: the price of inc units is now reduced by this amount (total amount paid out divided by number of units outstanding).

Acc units, on the other hand, do not make any distributions. So the price of an acc unit will not change (all else being equal).

End result: inc units have slightly reduced in price (but you have now cash in the bank), acc units remain unchanged (but the cash remains in the fund where it will be re-invested by the fund manager).

Of course the reality is slightly more complicated.

I would suggest you also look at the annual report that Fidelity publish (it's a very long and boring document though!)

coyrls

AHB2019 wrote: »

But (please be patient with my questions!) how do I know that the dividend was entirely reinvested (as opposed to partially reinvested), and is there any way of finding out what effect the dividend reinvestment had on the unit price?

Another question: the chart shows the fund performance compared to the FTSE all-share index. Surely if it was an accumulation fund it should massively outperform the index, as it is reinvesting rather than providing an income.

Apologies if these questions are seemingly dumb.

1) Compare a graph of the inc version with the acc version and you will see the effect of the reinvested dividends.
2) The index is with dividends re-invested, if you use the Trustnet graphing tools: https://www.trustnet.com/Tool/Charting.aspx?typeCode=NUKX,NB:AFIA,NB:AFIB,NB:AFIC
you can compare the fund against the index without dividends reinvested.
(click down on "Chart Basis" and choose "without income reinvested").