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Funds valuation point query

Hello,
I'm having some confusion with the valuation point for most funds. Basically I understand the valuation point is usually around 10am - midday. I recently sold some units around 9am from lloyds ready made investments fund. The reason I sold, aswell needing to sell in general anyway, was that the ftse all share tracker was showing that they had gone up a lot overnight and did indeed go up higher at midday (the valuation point) than they were at the previous midday. The bulk of the fund is this tracker. Therefore I thought the fund had made a gain since the day before. However, the price of the valuation that I received for the units I sold seemed to be based on the previous days valuation when the ftse was lower. Since looking into it further it appears that there is a one day delay in terms of the ftse all share index and the valuation of the fund with the fund valuation being in a sense one day delayed. The person on the phone told me most funds operate like this.
So I was just wondering is it not the case that this would be open to exploitation in volatile markets, because in a sense if you buy or sell at say 11.30am (just before the valuation point) you could be fairly sure of making a gain on the previous day as you would know that the valuation in half an hour will be based on the previous day and you would be able to see from the current ftse tracker whether tomorrows price would be higher or lower than the previous days price. Or would the bid/spread and fees make this not practical unless it was exremetly volatile markets (enough to make a bigger gain than the bid spread)?

Replies

  • EdGasketTheSecondEdGasketTheSecond Forumite
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    There does seem to be some lag in funds pricing compared to the real market. However whether there is enough volatility to benefit from this in a trading sense is doubtful but you might achieve a better outcome than otherwise if you fully understand the pricing point and dealing point of the fund and compare with what the current market is doing. Most payments into funds are on a regular basis e.g. pension contributions through salary sacrifice for instance, and these go in without any attempt to 'time' the market.
  • edited 30 March 2020 at 4:55PM
    ThrugelmirThrugelmir Forumite
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    edited 30 March 2020 at 4:55PM
    Funds will be valued after the main markets have closed. You are in effect buying and selling blind. Trades will have a cut-off point in the morning i.e need to be placed. They'll be dealt at the price determined later for that day later. Not on the preceding days close. 

    If sales exceed new purchases. Also allowing for dividend income etc. Then the fund will need to liquidate assets that day to fund redemptions. 
  • AlbermarleAlbermarle Forumite
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    Normally there is a cut off point , many hours before the valuation point . If you buy/sell the fund after this cut off point , your sale/purchase will be based not on the next valuation point, but the one after, so maybe 36 hours later . A number of threads recently have dealt with the valuation points of the well known Vanguard LS funds . This is 9pm, but the cut off point is 09.00/10.00am ( depending on platform ) So if you place the sell/buy order at 10.30 am on Tuesday , the valuation point is 9pm on Wednesday.
    Basically funds are designed as long term investments and not for trading/timing  the markets . To do this you need investments that trade in real time, but that is a different kettle of fish of course.
  • Hosai1Hosai1 Forumite
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    Normally there is a cut off point , many hours before the valuation point . If you buy/sell the fund after this cut off point , your sale/purchase will be based not on the next valuation point, but the one after, so maybe 36 hours later . A number of threads recently have dealt with the valuation points of the well known Vanguard LS funds . This is 9pm, but the cut off point is 09.00/10.00am ( depending on platform ) So if you place the sell/buy order at 10.30 am on Tuesday , the valuation point is 9pm on Wednesday.
    Basically funds are designed as long term investments and not for trading/timing  the markets . To do this you need investments that trade in real time, but that is a different kettle of fish of course.
    I understand that they are long term investments. But I've been looking at the 12am valuation point of the Scottish Widows managed growth valuation (which is the fund for lloyds ready made investments) versus the ftse all share tracker over a number of weeks and there is always a one day lag. It follows the overall pattern of the FTSE in terms of going up and down but one day behind.
  • edited 30 March 2020 at 5:27PM
    Hosai1Hosai1 Forumite
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    edited 30 March 2020 at 5:27PM
    In terms of my original post, the big gain in the valuation price of the fund, didn't happen until the day after I had sold, which was when at the valuation point (12am) the Ftse had sunk a lot.
  • edited 30 March 2020 at 5:27PM
    ThrugelmirThrugelmir Forumite
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    edited 30 March 2020 at 5:27PM
    Hosai1 said:
    Normally there is a cut off point , many hours before the valuation point . If you buy/sell the fund after this cut off point , your sale/purchase will be based not on the next valuation point, but the one after, so maybe 36 hours later . A number of threads recently have dealt with the valuation points of the well known Vanguard LS funds . This is 9pm, but the cut off point is 09.00/10.00am ( depending on platform ) So if you place the sell/buy order at 10.30 am on Tuesday , the valuation point is 9pm on Wednesday.
    Basically funds are designed as long term investments and not for trading/timing  the markets . To do this you need investments that trade in real time, but that is a different kettle of fish of course.
    I understand that they are long term investments. But I've been looking at the 12am valuation point of the Scottish Widows managed growth valuation (which is the fund for lloyds ready made investments) versus the ftse all share tracker over a number of weeks and there is always a one day lag. It follows the overall pattern of the FTSE in terms of going up and down but one day behind.
    As per my earlier post the fund will be valued after the market has closed. The time is when the dealing price is announced. It's not the valuation point of the fund. 
  • edited 30 March 2020 at 5:29PM
    Hosai1Hosai1 Forumite
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    edited 30 March 2020 at 5:29PM
    Hosai1 said:
    Normally there is a cut off point , many hours before the valuation point . If you buy/sell the fund after this cut off point , your sale/purchase will be based not on the next valuation point, but the one after, so maybe 36 hours later . A number of threads recently have dealt with the valuation points of the well known Vanguard LS funds . This is 9pm, but the cut off point is 09.00/10.00am ( depending on platform ) So if you place the sell/buy order at 10.30 am on Tuesday , the valuation point is 9pm on Wednesday.
    Basically funds are designed as long term investments and not for trading/timing  the markets . To do this you need investments that trade in real time, but that is a different kettle of fish of course.
    I understand that they are long term investments. But I've been looking at the 12am valuation point of the Scottish Widows managed growth valuation (which is the fund for lloyds ready made investments) versus the ftse all share tracker over a number of weeks and there is always a one day lag. It follows the overall pattern of the FTSE in terms of going up and down but one day behind.
    As per my earlier post the fund will be valued after the market has closed. The time is when the dealing price is announced. It's not the valuation point of the fund. 

    What is is meaning behind the valuation point being at midday if it is actually valued at the end of the day?
  • ThrugelmirThrugelmir Forumite
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    This will be the price that the previous days buy and sell orders will be dealt at. 
    The morning will be required to perform the actual valuation calculations. 
  • whambarwhambar Forumite
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    @Hoasi1 - My work place pension if with SW - if i change funds it says that any changes made before midday will show on the 3rd business day, its gives an example that changes made before midday Monday will show on my fund page on Wednesday morning at that days opening price, changes made after midday will show on Thursday at that days opening price. At around 2200 each working day SW update the days fund price (buy/sell) on their website which i assume is the price used to decide the fund allocation for me the following mornings this would be the funds opening price (if you type Scottish widows latest fund prices into a search engine it will land you at the right page then select the fund type - maybe series 2 if workplace pension). from what i can fathom from casual observation is that my funds that are UK based say BG UK Equity appear to reflect on a Wednesday morning a general direction of Tuesday movement, however if they have maybe US funds say BG North American this appears to reflect Mondays activity - i'm happy to be corrected on this though
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