Valuation Point?

Thrugelmir

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

tg99

Thrugelmir said:

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

That’s not correct. For example, UK equity funds that value at 12pm on a Wednesday will calculate the price based on the underlying share prices also at 12pm on the same day. This is why it takes a few hours to publish the price at say 3/4pm earliest in order for the prices to be calculated and checked. The funds do not calculate their Wednesday price based on the UK equity market close on Tuesday.

t1redmonkey

tg99 said:

Thrugelmir said:

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

That’s not correct. For example, UK equity funds that value at 12pm on a Wednesday will calculate the price based on the underlying share prices also at 12pm on the same day. This is why it takes a few hours to publish the price at say 3/4pm earliest in order for the prices to be calculated and checked. The funds do not calculate their Wednesday price based on the UK equity market close on Tuesday.

Can confirm what tg said is correct (I work in investments so I know how the calculation process more or less works).

port_of_spain

Thrugelmir said:

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

Sorry, this really isn't making any sense. (Even leaving aside that there is no time that "the market" closes for a global fund.)

A specific example. This Monday, 6 April, I logged into my IWeb account an hour or two after midnight, and placed an order to buy HSBC European Index Class C Inc. This fund has a valuation point of 12:00. My purchase was confirmed later on 6 April, using the unit price published for 6 April.

According to your theory, my purchase must have been done using the prices when European markets closed on Friday 3 April, because the calculation they perform on Monday 6 April relates to the previous market close. That can't be the case, because they accepted my order in the early hours of 6 April, so they had no chance to buy shares using my cash at the prices on 3 April. If they had been  calculating prices in the way you suggest, they'd have had to impose a dealing cut-off time at some time on 3 April, for the 12:00 valuation point on 6 April. Which they didn't.

Clearly, the 12:00 pricing point on 6 April must have used prices from European markets on 6 April, presumably literally at 12:00. (That is after all what one would expect "valuation point" to mean!)

t1redmonkey

12pm funds do take into account what's been happening in the market during the mornings.  There are internal teams in the investment companies who then work with the trustees in the afternoon to get a final unit price out by around 3pm/4pm but can be later if there's been a lot of volatility in the markets that day.

Thrugelmir

port_of_spain said:

Thrugelmir said:

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

Sorry, this really isn't making any sense. (Even leaving aside that there is no time that "the market" closes for a global fund.)

A specific example. This Monday, 6 April, I logged into my IWeb account an hour or two after midnight, and placed an order to buy HSBC European Index Class C Inc. This fund has a valuation point of 12:00. My purchase was confirmed later on 6 April, using the unit price published for 6 April.

According to your theory, my purchase must have been done using the prices when European markets closed on Friday 3 April, because the calculation they perform on Monday 6 April relates to the previous market close. That can't be the case, because they accepted my order in the early hours of 6 April, so they had no chance to buy shares using my cash at the prices on 3 April. If they had been  calculating prices in the way you suggest, they'd have had to impose a dealing cut-off time at some time on 3 April, for the 12:00 valuation point on 6 April. Which they didn't.

Clearly, the 12:00 pricing point on 6 April must have used prices from European markets on 6 April, presumably literally at 12:00. (That is after all what one would expect "valuation point" to mean!)

Unfortunately I work on facts and first hand knowledge of the industry not theories. 

port_of_spain

Thrugelmir said:

Unfortunately I work on facts and first hand knowledge of the industry not theories. 

You're bullsh*tting now, mate.

You may, for all I know, have accurately described how funds were priced back when it was done by clerks using quill pens. But in that case, clearly some things have changed.

bowlhead99

Thrugelmir said:

port_of_spain said:

Thrugelmir said:

No theory I can assure you. Funds are valued and priced after the market has closed. That's a basic fact. That's why there's a once a day pricing point to buy and sell. 

Clearly, the 12:00 pricing point on 6 April must have used prices from European markets on 6 April, presumably literally at 12:00. (That is after all what one would expect "valuation point" to mean!)

Unfortunately I work on facts and first hand knowledge of the industry not theories. 

For the fund to be 'valued and priced' you need to be after the valuation point, otherwise the accountants can't possibly know what the market value of the holdings were. Nobody would say that's not a basic fact. And it's true that the pricing point / valuation point is generally only once a day (or less frequently with some funds).

However, the notion that the market needs to be closed for the accountants to do their jobs, is simply not the case. All that needs to have happened is for the asset values at the valuation point to have been observed and recorded, and then the data will be available to the accountants, so they can start their work. If the market is still open, then of course for many shares or other instruments, the observed prices would move again between the valuation time and the day's close, but the accountants will ignore it. It's the value 'as at' the valuation time which is taken - not the day's closing price.

It is entirely true that HSBC's European index fund prices using values as at 12 noon UK time each day, as do their FTSE100, 250 and All-Share funds. The fact that the market continues to be open after they have noted the noon values of the shares for a day is not a barrier to them producing a noon valuation; they will use that noon valuation for dealing with any subscriptions or redemptions which make the cut-off to be dealt with at that valuation point. They also use the same 'noon UK' dealing point for the Japanese tracker (where the market is already closed by that point) and the American index tracker (where the market is not yet open), and the FTSE All-World where some markets are open and some are not.

(source: first-hand knowledge of the industry, combined with reading the prospectus for HSBC Index Tracker Investment Funds, dated 1/4/2020)

Freecall

bowlhead99 said:

For the fund to be 'valued and priced' you need to be after the valuation point, otherwise the accountants can't possibly know what the market value of the holdings were. Nobody would say that's not a basic fact. And it's true that the pricing point / valuation point is generally only once a day (or less frequently with some funds).

However, the notion that the market needs to be closed for the accountants to do their jobs, is simply not the case. All that needs to have happened is for the asset values at the valuation point to have been observed and recorded, and then the data will be available to the accountants, so they can start their work. If the market is still open, then of course for many shares or other instruments, the observed prices would move again between the valuation time and the day's close, but the accountants will ignore it. It's the value 'as at' the valuation time which is taken - not the day's closing price.

It is entirely true that HSBC's European index fund prices using values as at 12 noon UK time each day, as do their FTSE100, 250 and All-Share funds. The fact that the market continues to be open after they have noted the noon values of the shares for a day is not a barrier to them producing a noon valuation; they will use that noon valuation for dealing with any subscriptions or redemptions which make the cut-off to be dealt with at that valuation point. They also use the same 'noon UK' dealing point for the Japanese tracker (where the market is already closed by that point) and the American index tracker (where the market is not yet open), and the FTSE All-World where some markets are open and some are not.

(source: first-hand knowledge of the industry, combined with reading the prospectus for HSBC Index Tracker Investment Funds, dated 1/4/2020)

Spot on!

It really is pretty basic investment mechanics.  The incredible thing is that people invest their hard-earned in financial vehicles where they don't appear to understand such fundamental aspects.