We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
HL Investment Fund Spread 5.77%
Comments
-
There is nothing wrong with a buy/offer spread, it is merely an arguably fairer way of assigning the charges. Especially with a fund that holds actual property, rapid buys and sells are a large cost - the fund cannot reasonably sell one of its properties to pay you when you want to sell your small investment, therefore is has to hold large cash (or close to cash) reserves. If the extra cost wasnt paid by the seller it would have to be paid by everyone who didnt sell. So a long term holder should be in favour of a higher bid offer/spread - the longer they hold the fund the lower the overall charges compared with there not being a spread. And if you arent a long term holder you should not be investing in such funds in the first place.0
-
If you keep investing you will come across the investment you have bought has not been investigated fully by your good self. It's the price of an education. Ha hum move on.0
-
i think they should at least mention it on the projection as clearly it has an affect on the value of your investment. From an investors point of view it seems to work in the same way as an initial charge ?
It doesn't work the same way as an initial charge, which is cost to you and revenue to the fund manager or promoter. As a result of changes over a year ago, they no longer have an initial charge even for the full-price retail R class, and don't pay commissions to intermediaries.
The amount received by the fund when you choose to subscribe for a new share to be created at a high price for you to come and join the fund, or redeem out of your holding at a lower price, benefits the fund, not the manager.
And as we said above, it covers the fund's direct expenses of investing in an expensive, illiquid asset class which has high transaction costs. Their prospectus and KIID note the high spread as a risk factor for you to be aware of (higher than it would need to be if they had been investing in a more liquid and cheap-to-transact asset class).
That risk warning is particularly relevant if you are going to buy and sell in quick succession, but much less relevant if you're not going to do that and will instead hold for the long term while other people come in and pay the joiners' and leavers' spread, effectively paying you to join your exclusive club which you're now already in.
It mentions in the annual report that sometimes there will be buyers and sellers on the same day so their buys and sells will offset without new address bedding to be created, resulting in surplus income for the ACD. It says that this is paid into the fund. So it's the fund investors as a whole, and not the manager/ACD, who will be getting the benefit.
As such, you can't really say, "it seems to work the way as an initial charge" because charges and fees benefit the managers or service providers who get to charge those fees - while this doesn't; it's more like a dilution levy than a fee, as its purpose is to protect long term investors from the actions of short term traders.0
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 353.6K Banking & Borrowing
- 254.2K Reduce Debt & Boost Income
- 455.1K Spending & Discounts
- 246.7K Work, Benefits & Business
- 603K Mortgages, Homes & Bills
- 178.1K Life & Family
- 260.7K Travel & Transport
- 1.5M Hobbies & Leisure
- 16K Discuss & Feedback
- 37.7K Read-Only Boards