Q- Fund factsheet data ?

bowlhead99

DireEmblem said:

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".

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 capital.

No, you have that backwards - perhaps you misunderstand the way the terminology is used. In this fund's case, the fees aren't applied to capital, they are taken out of the income before that net income is paid to the investors, as mentioned in my earlier post where I'd looked at the annual report and the prospectus.

The distribution yield is what they might expect to distribute over the next 12 months, while the underlying yield is a measure of the 'annualised income, net of expenses'.

If a portion of expenses is charged to capital then the amount that is available for distribution to investors will be greater than the 'underlying yield' measure... because the underlying yield is basically what gross income do you get from your investors less what does it cost to run the fund -while if you bear some of those running costs out of your capital account, the amount you'll be able to distribute when you pay out the net revenue to your investors will be greater than the fund's actual gross income net of its running costs; some of the running costs were settled from capital and won't get in the way of the investee financial instruments' income payments reaching the investors' pockets.

So if the factsheet had said the distribution yield was a figure higher than the underlying yield, you would know they were booking some of the running costs against capital.

However, this factsheet says the distribution yield and the underlying yield are the same, which means that if the fund is making (e.g.) 4% gross income and spending 0.6% on running it for a net underlying yield of 3.4%, it will only be able to distribute out 3.4% because that's all it will have left in its income account after the income account bears all those running costs.  If it instead made 4% gross income and spent 0.6% on running the fund but charged half of those running costs to capital, it would have credited its income account with 4.0% and debited it with 0.3% and end up sending the 3.7% out to investors. The 3.7% they could afford pay is better than the theoretical 'underlying' net income achieved from the portfolio after expenses, due to the investors being comfortable with having their capital (or capital gains) used to cover some or all of the running costs incurred.

Charging some of the expenses to capital has the effect of increasing the distribution(s) for the year above the underlying rate of 'gross investment income less fund-running costs', and constraining the fund’s capital performance by an equivalent extent.

Another_Saver

DireEmblem said:

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 i in int appears the fees are applied to capital.

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

This is why you shouldn't drink and write MSE forum posts, kids. It makes you forget about fees.
The distribution yield stated by a fund is rarely as reliable as using official index or bond data, so i tend to go off the latter and deduct fees manually.
What frsitrates me is that you this the fund houses don't tell you this so you have to go and learn it for yourself somehow.

DireEmblem

Another_Saver said:

This is why you shouldn't drink and write MSE forum posts, kids.

Thanks  Totally correct.  No idea why I flipped the meaning.  Overall, the information in the prospectus, Accounts, KIIDS, Factsheets is too much and not simplified/clear enough for most to easily digest in my opinion.  The Distribution yield at the end of day is just a forecast based on information at a certain point in time.  Using the underlying bond data would give you a slightly more accurate result - it should capture upcoming changes in bond coupons etc, but then how much time are you wanting to spend forecasting an estimate amount?

C_Mababejive

Thanks bowlhead for the very comprehensive explanation which i shall re read and digest,also to others who have contributed. I was just reviewing the money i have in that fund with a view to possibly redeploying it elsewhere.