Q- Fund factsheet data ?

C_Mababejive

When quoting the approx/est yield on a fund ,is the convention to quote yield   after charges  or prior to charges?

Prism

I would say after charges but some factsheets might contain both gross and net yield.

dunstonh

Charges are not made on the yield.   Charges are made against the capital value.

Just for confirmation, you are not reading the yield as the total return are you? (many do make that mistake)

Prism

dunstonh said:

Charges are not made on the yield.   Charges are made against the capital value.

Just for confirmation, you are not reading the yield as the total return are you? (many do make that mistake)

Do they not have a choice? The reason I ask is that Fundsmith for example gives the gross yield as a figure, then deducts the charges and pays out the net yield in its income versions of the fund.

dunstonh

Prism said:

dunstonh said:

Charges are not made on the yield.   Charges are made against the capital value.

Just for confirmation, you are not reading the yield as the total return are you? (many do make that mistake)

Do they not have a choice? The reason I ask is that Fundsmith for example gives the gross yield as a figure, then deducts the charges and pays out the net yield in its income versions of the fund.

There are some exceptions but the majority will take the charges from cash within the fund and apply it to the unit price on both their income share class and their acc share class.

bowlhead99

Prism said:

dunstonh said:

Charges are not made on the yield.   Charges are made against the capital value.

Just for confirmation, you are not reading the yield as the total return are you? (many do make that mistake)

Do they not have a choice? The reason I ask is that Fundsmith for example gives the gross yield as a figure, then deducts the charges and pays out the net yield in its income versions of the fund.

Depending on a fund's objective, their prospectus may outline that charges (or certain elements of the charges) will be taken out of income or capital or both.

For example a fund whose objective is to deliver a high level of income from its investments may prefer for management fee to be booked against capital so that there is more income left over to be paid out as distributions. Whereas Fundsmith investors are not holding it for its yield and so having all the operating costs come out of the income before paying the residual to investors.

The OEIC rules mean that all the fund's net income for the year must be paid out (85% for an investment trust), but if it's the type of fund where you are trying to give the investors a high yield there may be a strategic preference to avoid that net income figure having a lot of deduction before it can be paid, and so 'take more of the management fees against capital' could be adopted - as e.g. it's known that a portion of the long term return of an equity income fund would be coming from realised gains rather than dividend income from investee companies, so such a policy is defendable.

But you wouldn't expect them to have 'a choice' to flip flop on the treatment each year, they should make the method of allocation clear in the prospectus.

DireEmblem

Agree with Bowlhead.  The guidance UK funds is pretty clear, but not so much on Irish/European Funds.

Fees on UK Funds can be accrued against Income or Capital.

For Debt and equity funds, the yield is generally estimated by the income distributed In the prior 12 months, divided by the fund price as at the date of the quoted yield.

If the funds objective is to provide high income, then the expenses will generally be charged against capital, so these two yields would generally exclude fees.

In addition, Bond funds can also quote an underlying yield.  This is the same calculation, but including all capital expenses.  The view here is to giver a better picture of the yield including costs borne by the fund.

For European funds to my knowledge, there is no such guidance.

For me, to make things simpler, funds quote their fees through their ongoing charges, Yields should be quoted based on the income distributed only, and a third and final factor - total return(performance of the fund including capital and income reinvested) should be included as well.

C_Mababejive

Thanks all, the fund i have in mind is
https://www.trustnet.com/factsheets/o/09q3/jupiter-strategic-bond-i-acc

bowlhead99

C_Mababejive said:

Thanks all, the fund i have in mind is
https://www.trustnet.com/factsheets/o/09q3/jupiter-strategic-bond-i-acc

In that fund the expenses are taken off income to get 'net revenue' which is distributed to investors; the management fee and operating costs don't come off capital.

So for the year ended Apr 2020, they had £166.5m of revenue and £32m of expenses and a million or so of tax and interest cost, leaving them with 133.6m of net revenue. They distributed close to that, £133.8m (counting Acc distributions within distributions even though they are not actually paid out in cash.   

Separately they had £28m of realised and unrealised capital gains, which stayed in the fund while the net revenue was paid out as distributions. 
The total fund value went up over the year by about £324m due to the aforementioned capital gains plus net new subscriptions from investors and the fact that £65m of the distributions were attributable to the ACC class so were retained in the fund.  You can see this sort of stuff in the periodic 'long reports'
(https://www.jupiteram.com/UK/en/Professional-Investors/Document-Library?itemName=Jupiter+Strategic+Bond+Fund+UT+Interim+Long+Report+GEN+en )

From looking at the prospectus, they mention that some of their funds which have a deliberate objective of generating income for investors will charge some or all expenses to capital, e.g. the ones below - but the particular fund you have in mind is a strategic bond strategy looking to make a decent total return and is not majorly focused on delivering income (despite the fact that it is operating in the fixed income space rather than the equities space).

- Jupiter Enhanced Distribution Fund (100% of All Expenses)

- Jupiter European Income Fund (100% of All Expenses)

- Jupiter Growth and Income Fund (50% of Annual Management Charge)

- Jupiter Global Equity Income Fund (100% of All Expenses)

- Jupiter Income Trust (100% of All Expenses)

- Jupiter Japan Income Fund (100% of All Expenses)

- Jupiter Monthly Alternative Income Fund (100% of Annual Management Charge)

- Jupiter North American Income Fund (100% of All Expenses)

- Jupiter Responsible Income Fund (100% of All Expenses)

Another_Saver

All I can add to this is that for equity index funds, don't trust the factsheet, find the index's factsheet from the index provider (i.e. for the FTSE 100 go on FTSERussell.com) and for bonds, use the yield to maturity or YTM rather than the "distribution yield".

DireEmblem

Another_Saver said:

All I can add to this is that for equity index funds, don't trust the factsheet, find the index's factsheet from the index provider (i.e. for the FTSE 100 go on FTSERussell.com) and for bonds, use the yield to maturity or YTM rather than the "distribution yield".

I believe the YTM doesn't include fees, so is the gross distribution.  In this case the underlying and distribution yields are the same, so its a fair all in representation as it appears the fees are applied to income.

That being said, yields in general are a bit nonsense given the variety of calculations, or lack of guidance on non uk funds.