BlackRock UK Absolute Alpha Class P Acc. BOUGHT at SELL PRICE!?

[Deleted User]

Hi..

I bought into the above mentioned fund yesterday through HL (ISA), and the deal went through at the stated SELL price.

The Last valuation as at 26-02-2008 (when my purchase went through) according to Hargreaves Lansdown, was .....

Sell : 114.60p | Buy : 120.60p

Surely I should have paid 120.60p.... shouldn't I ?!

Please can someone explain what's happened here?

Thanks in advance.
:money:

purch

The initial charge on this Fund is 5%

The Difference between 120.6p and 114.6p is 6p or 5%

HL have discounted the initial charge

wombat42_2

Deleted_User wrote: »

Hi..

I bought into the above mentioned fund yesterday through HL (ISA), and the deal went through at the stated SELL price.

The Last valuation as at 26-02-2008 (when my purchase went through) according to Hargreaves Lansdown, was .....

Sell : 114.60p | Buy : 120.60p

Surely I should have paid 120.60p.... shouldn't I ?!

Please can someone explain what's happened here?

Thanks in advance.
:money:

Might be quickest if you just phone them up (and tell us what the outcome is).

purch

Might be quickest if you just phone them up

Yeah...tell em you want to pay 120.6p not 114.6p !!!!!!

Let em shove their initial saving where the sun don't etc etc

Dodgy B*8s"a#d^ !!!!!!!!!!

meester

Deleted_User wrote: »

Hi..

I bought into the above mentioned fund yesterday through HL (ISA), and the deal went through at the stated SELL price.

The Last valuation as at 26-02-2008 (when my purchase went through) according to Hargreaves Lansdown, was .....

Sell : 114.60p | Buy : 120.60p

Surely I should have paid 120.60p.... shouldn't I ?!

Please can someone explain what's happened here?

Thanks in advance.
:money:

Hi.

Normally with a unit trust, there are about three prices.

The first of these is the cancellation price.

This represents the cost of selling the underlying shares in the market at their bid price.

The next is the creation price. This is the cost of BUYING the shares at the offer price in the market.

When you sell your units, you should receive the bid price. In other words if the Unit Trust owns 1 million shares of BP, which can be sold for 300p and bought for 301p, and there are 1 million units, then the cancellation price is 300p and the creation price is 301p.

The OFFER price, which is how much the units are sold for in the market is equal to the cancellation price plus the initial charge.

So if the unit trust is quoted as 300p bid, and 316.84p offer, with an initial charge of 5%, and discount of 5%, then you need to multiply the 316.05 by 0.95 to calculate the price you actually pay. So in that case you would pay 301p. So in the case of the offer price quoted by HL, it is actually not the price you pay, because you need to take off the initial charge. If the charge is 5.25% and the discount 5%, you need to multiply the offer price by .95 (5% discount from the full offer price) to find the price you will actually pay. To see the actual cost of you buying that, you need to divide THAT price by the bid price to see the cost of getting in.

In practice some unit trusts actually narrow these spreads when they are dealing in illiquid markets, so the spreads don't represent full cancellation vs. creation + initial charge. This is because wide spreads are unattractive to investors. So in fact the bid/offer cost never gets beyond about 1% for most funds. 1% is largely noise. Of course if the UT doesn't want new money, they can widen this to full bid/offer costs. THis would make sense for small companies funds (illiquid).

OEICs have no bid/offer spread and basically existing investors subsidise new investors to buy the new shares required to fund your purchase. It's all smoke and mirrors.

In terms of BR AA, there is probably no/small cancellation/creation spread because they don't actually hold any shares. So hence offer is exactly to bid + initial charge.

[Deleted User]

purch wrote: »

The initial charge on this Fund is 5%

The Difference between 120.6p and 114.6p is 6p or 5%

HL have discounted the initial charge

I can't believe I didn't spot that!:o Thanks a lot.:T

purch

Normally with a unit trust, there are about three prices.

The first of these is the cancellation price.

This represents the cost of selling the underlying shares in the market at their bid price.

The next is the creation price. This is the cost of BUYING the shares at the offer price in the market.

When you sell your units, you should receive the bid price. In other words if the Unit Trust owns 1 million shares of BP, which can be sold for 300p and bought for 301p, and there are 1 million units, then the cancellation price is 300p and the creation price is 301p.

The OFFER price, which is how much the units are sold for in the market is equal to the cancellation price plus the initial charge.

So if the unit trust is quoted as 300p bid, and 316.84p offer, with an initial charge of 5%, and discount of 5%, then you need to multiply the 316.05 by 0.95 to calculate the price you actually pay. So in that case you would pay 301p. So in the case of the offer price quoted by HL, it is actually not the price you pay, because you need to take off the initial charge. If the charge is 5.25% and the discount 5%, you need to divide the offer price by .9475 and multiply by .95 to find the price you will actually pay. To see the actual cost of you buying that, you need to divide THAT price by the bid price to see the cost of getting in.

In practice some unit trusts actually narrow these spreads when they are dealing in illiquid markets, so the spreads don't represent full cancellation vs. creation + initial charge. This is because wide spreads are unattractive to investors. So in fact the bid/offer cost never gets beyond about 1% for most funds. 1% is largely noise. Of course if the UT doesn't want new money, they can widen this to full bid/offer costs. THis would make sense for small companies funds (illiquid).

OEICs have no bid/offer spread and basically existing investors subsidise new investors to buy the new shares required to fund your purchase. It's all smoke and mirrors.

:eek: :eek: :eek: :eek:

I preferred the simpler explanation !!!! :rotfl: