Vanguard Settlement Price

Hal17

Could someone kindly in layman terms explain what a Settlement Price is please? This relates to a Fund purchase on Vanguard. For example I made a purchase in their Life Strategy fund for £3K and it shows a settlement price of £261.53. Thanks.

Albermarle

This fund is made up of units and when you make a purchase , you buy a number of units ( or part of a unit )
I presume £261.53 is the latest unit price and what your deal was settled at . So you will have bought 11.47 units .

FaceHead

You instruct vanguard that you want to invest into a fund. Let's say you do it with a debit card, so they take the funds from your bank account straight away. You've agreed to invest an amount of money, but you don't know what the price of a unit of the fund will be when your order is fulfilled, so you don't know how many units of the fund you'll get.

At the next dealing point, your money is used to buy into the fund at whatever the price happens to be at that time. A while later, vanguard tell you that they invested the amount of money you agreed, tell you what the settlement price was, and therefore how many units you now have. 

Because of this lag between placing your order and getting it fulfilled the settlement price isn't known when placing your order, so you get told about it after the fact. 

bowlhead99

All funds have a published  'price' per share or per unit, which changes over time as the funds' net assets (investments and cash and other assets less debts and other liabilities).

The published price at yesterday's valuation point for the LifeStrategy 100% Equity Fund, Accumulation class, was £261.53 per share.  So when you have placed an order with your platform to buy £3000-worth of shares in the fund, they are telling you that the settlement price was finalised at £261.53 per share, and if you were spending exactly £3000, you would get about 11.47 shares for your money.

If in the future those shares grow in value to £400 per share, then you will be able to sell your 11.47 shares for £300 each and get about £4.6k for them.  If you wanted to 'cash in' a specific amount of money (rather than all the shares) you would just tell them how much money you wanted to get (e.g. £2000), and once they reached the next daily valuation point they would let you know the exact 'settlement price' per share, which would determine how many shares they'll redeem for you to put the £2000 back in your hands (in that case, £2000 at £400 per share would cost you 5 shares out of the 11.47 that you'd bought).

lindabea

Hal17 said:

Could someone kindly in layman terms explain what a Settlement Price is please? This relates to a Fund purchase on Vanguard. For example I made a purchase in their Life Strategy fund for £3K and it shows a settlement price of £261.53. Thanks.

It means that you bought 11.4710 units of VLS 100 acc fund at the close of yesterday's price of 261.53. 

Hal17

Thank you everyone for your help and explanation, very much appreciated. That makes prefect sense when you read the replies.