Experience with Fidelity; ordering Vanguard funds

mn1

I wonder what you think about this guys, especially if you use Fidelity platform (by the way I use Fidelity via Cavendish online)

I placed an order with Fidelity on the 26th of May for Vanguard funds VLS100

I was given the price on the 27th , which is expected , this was clear from transaction history 

Today I noticed that the price changed to the price of the 28th

I phoned Fidelity who explained it by saying the Vanguard uses "next day price +1" for their funds

The transaction is still showing as "pending" but it says "priced"

The price jumped from 217 to 223 per unit 

Has anyone experienced this before on Fidelity or other platforms ?
TIA

bowlhead99

If you placed an order on Tuesday 26th, and did it any later than the early morning cut-off time to get the price of the 26th, you would get the price of the 27th. That's what you expected, and it's what we would expect as well, whether we use Cavendish/Fidelity or any other platform.

The price of the 27th was 223.68. So if you have paid 223ish, that's correct.  It's published at https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-100-equity-fund-accumulation-shares/price-performance if you need to check a daily price. You haven't been diddled.

The price of the 28th was 223.76, but you shouldn't have got that,  because your order would have made the cut-off for 27th, and been priced at the 223.68.

The price of the previous Friday night before the bank holiday was 217, and the price for Tuesday night 26th was 219. The cut-off is early morning for that night's price. So the price you should have got, if ordering beyond the very early morning of Tuesday 26th, is the price calculated and published for Wednesday 27th. 

As the pricing point is 9pm each evening (after US markets close), what is shown on a platform's website or in trade confirmations can be 'stale', because although they could confirm on Wednesday 27th that your order was definitely in with the fund manager and would be successful, they couldn't tell you what price that is until the accountants at Vanguard do their work to look at all the values of the underlying holdings of the fund at 9pm Wednesday 27th, which takes time. So by Thursday 28th once the accountantst have done their work and published the value from the 27th, platforms such as Fidelity can update the 'latest new price' to display on their website, and finalise your order confirmation with the actual price you were given for Wednesday (the 223.68).

In summary, an order placed daytime Tuesday 26th will get the investment valuation from the end of the next market session, Wednesday 27th. If you got that price (223.68), you've been treated correctly. But the net asset value (the subscription/redemption price) of Wednesday 27th is not generally known until Thursday 28th. By that point (with hindsight and published prices available) they can tell you how many units you'll have been given for your Tuesday order of £x, but up until then any confirmations are only going to be 'indicative' of what you actually got.

Perhaps what has happened is that you had 217 in your head as the value you'd seen on the website on Tuesday 6th while placing the order (which was the value of the previous business day, 22nd, and not a price you would ever expect to get, but it's all they can tell you when placing the order... ) and then later you end up getting the price around 223, which you don't find out about until Thursday or later, and you assume it's Thursday's price. But actually if you got 223.68 it's Wednesday's price and all is in line with what you (or we) should expect. If you got 223.76 it's Thursday's price, which sounds wrong (though as it happens, it's only 0.03% more than Wednesday).

cattie

What an excellent & informative explaination! 

mn1

bowlhead99 said:

If you placed an order on Tuesday 26th, and did it any later than the early morning cut-off time to get the price of the 26th, you would get the price of the 27th. That's what you expected, and it's what we would expect as well, whether we use Cavendish/Fidelity or any other platform.

The price of the 27th was 223.68. So if you have paid 223ish, that's correct.  It's published at  if you need to check a daily price. You haven't been diddled.

The price of the 28th was 223.76, but you shouldn't have got that,  because your order would have made the cut-off for 27th, and been priced at the 223.68.

The price of the previous Friday night before the bank holiday was 217, and the price for Tuesday night 26th was 219. The cut-off is early morning for that night's price. So the price you should have got, if ordering beyond the very early morning of Tuesday 26th, is the price calculated and published for Wednesday 27th. 

As the pricing point is 9pm each evening (after US markets close), what is shown on a platform's website or in trade confirmations can be 'stale', because although they could confirm on Wednesday 27th that your order was definitely in with the fund manager and would be successful, they couldn't tell you what price that is until the accountants at Vanguard do their work to look at all the values of the underlying holdings of the fund at 9pm Wednesday 27th, which takes time. So by Thursday 28th once the accountantst have done their work and published the value from the 27th, platforms such as Fidelity can update the 'latest new price' to display on their website, and finalise your order confirmation with the actual price you were given for Wednesday (the 223.68).

In summary, an order placed daytime Tuesday 26th will get the investment valuation from the end of the next market session, Wednesday 27th. If you got that price (223.68), you've been treated correctly. But the net asset value (the subscription/redemption price) of Wednesday 27th is not generally known until Thursday 28th. By that point (with hindsight and published prices available) they can tell you how many units you'll have been given for your Tuesday order of £x, but up until then any confirmations are only going to be 'indicative' of what you actually got.

Perhaps what has happened is that you had 217 in your head as the value you'd seen on the website on Tuesday 6th while placing the order (which was the value of the previous business day, 22nd, and not a price you would ever expect to get, but it's all they can tell you when placing the order... ) and then later you end up getting the price around 223, which you don't find out about until Thursday or later, and you assume it's Thursday's price. But actually if you got 223.68 it's Wednesday's price and all is in line with what you (or we) should expect. If you got 223.76 it's Thursday's price, which sounds wrong (though as it happens, it's only 0.03% more than Wednesday).

Thank you for this good explanation
I looked again and I was given the price of Thursday at 223.76, and it clearly states the pricing date is 28/05.
As you said the difference is not too big but I am wondering now whether it is an issue with Fidelity or with Vanguard. I think Fidelity is explaining this by saying Vanguard funds follow "next pricing point +1" approach to pricing

Novice_investor101

From experience at work, Vanguard always seem to price at least 1 working day later than pretty much most other funds & take the longest to settle. 

bowlhead99

mn1 said:
hank you for this good explanation

I looked again and I was given the price of Thursday at 223.76, and it clearly states the pricing date is 28/05.
As you said the difference is not too big but I am wondering now whether it is an issue with Fidelity or with Vanguard. I think Fidelity is explaining this by saying Vanguard funds follow "next pricing point +1" approach to pricing

That sounds strange - as per Vanguard's prospectus for the fund:

Valid applications to purchase Shares of a Fund will be processed at a purchase price calculated with reference to the next Valuation Point for that Fund following receipt of the application, except in the case where dealing in a Fund has been suspended as set out below.

For the avoidance of doubt, all valid applications received before a Fund’s Cut-Off Time on a Dealing Day will receive that Dealing Day’s Valuation Point. All valid applications received after a Fund’s Cut-Off Time on a Dealing Day will receive the next Dealing Day’s Valuation Point.

A confirmation giving details of the price and number of Shares purchased will be issued, normally no later than the end of the Business Day following the Valuation Point for the relevant Fund (making reference to the determination of the price and, where appropriate, a notice of the applicant’s right to cancel)

Share Prices
Pricing basis
The Company deals on a forward-pricing basis at Share prices which are calculated with reference to the next Valuation Point determined for the Scheme Property after the purchase, redemption, conversion or switch of Shares is agreed. Shares are priced on a single, mid-market basis in accordance with the FCA Handbook.

Calculation of Share prices
There will only be a single price for any Share as determined from time to time by reference to a particular Valuation Point. The price of Shares of a relevant Class is calculated by reference to the Net Asset Value of the Fund to which it relates, as adjusted by any dilution adjustment (further details of which are set out in the “Dilution Adjustment” section below). In addition, as set out in Appendix 1, for purchases, there may be a preliminary charge and for redemptions, there may be a redemption charge.

Publication of prices
Daily prices for each Fund of the Company will be published on www.vanguard.co.uk and may be published on www.ft.com, and/or on such other websites and publications as may be determined by the ACD from time to time. Shareholders can obtain up-to-date Fund prices free of charge by telephoning the Administrator and Registrar at 0800 408 2065 or by fax on 0844 620 0002. As the ACD deals on a forward-pricing basis, the price that appears in these sources will not necessarily be the same as the one at which investors can currently deal. The ACD may also, at its sole discretion, decide to publish certain Share prices on other third party websites or publications but the ACD does not accept responsibility for the accuracy of the prices published in, or for the non-publication of prices by, these sources for reasons beyond the control of the ACD

There's nothing in that which would suggest that if you provide an order to Vanguard on Tuesday, you should get anything later than Wednesday's valuation point. The only reasonable explanation is that Fidelity is routinely collecting orders from customers during the day on Tuesday and into Wednesday which it doesn't provide to Vanguard until say 11am to midday on Wednesday, by which time Vanguard see it and agree that the next valuation point that the order qualifies for is Thursday. 

Many UK funds will have a cut-off of later in the morning than Vanguard set for their LifeStrategy series. For example Vanguard's own UK All-Share Index tracker has a pricing point of the end of UK market hours (4.30pm) but Vanguard accept orders for it until 2pm same day. So it's feasible that Fidelity have a practice of collecting up orders from clients and forwarding them to third party fund managers in a big batch at midday every day, which means that your order placed Tuesday afternoon will get to the fund manager/administrator at midday Wednesday and would catch the cut-off for Wednesday's price if it was for the UK All-Share Fund, but would miss the cut-off and only get Thursday's price if it was for the LifeStrategy fund.  If that is what they are doing, it makes sense that Fidelity would just tell customers that the pricing they will get when ordering LifeStrategy is next valuation point, + 1.

At the end of the day, open ended investment funds are to be bought and held for the long term and if a fund's value grows by 6% a year, one business day (a 250th of that) is about 0.02%. For day trading the markets, use a different product. There other investment platforms which would 'get you in or out' of a vanguard fund slightly quicker - including vanguard's own, at vanguardinvestor.co.uk which takes same day orders for LifeStrategy until 9am, or some others which say they will take orders to 10am, the prospectus cut-off time.

mn1

Many thanks for your informative answers

blue_max_3

I bought a fund one day and by the time it had been processed (next day) it had gone down. I would have been disappointed to have lost money before it had even got into my account! That was with a Fidelity SIPP.

Thrugelmir

blue_max_3 said:

I bought a fund one day and by the time it had been processed (next day) it had gone down. I would have been disappointed to have lost money before it had even got into my account! That was with a Fidelity SIPP.

A risk one must accept when trading in OEIC's during volatile market conditions. Though all that really matters is the price you ultimately sell at in the future. Never worth getting hung up on short term market volatility. 

Albermarle

blue_max_3 said:

I bought a fund one day and by the time it had been processed (next day) it had gone down. I would have been disappointed to have lost money before it had even got into my account! That was with a Fidelity SIPP.

These funds are designed for long term investment, and any movement in the day you bought is neither here nor there . In any case there is a 50% chance it will be in your favour.

blue_max_3

Yes, it was in my favour! I waited many weeks before making the decision, so pleased to see it was in the black. At least for now! Fully expecting a downturn, but frustrated to see the market keep rising. Didn't invest much really (1k). But made £8.50