HL Investment Fund Spread 5.77%

honey_pot wrote: »

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.