What is the difference between an OIEC and a Unit trust

Ollie_Orpin wrote: »

if you want to sell a OEIC holding of funds of say Jupiter or Fidelity fund, through a management company like Hargreaves what would you expect to receive, if the holding on that day is worth £2500. Is the selling price the same as the buying price and a commission charge is deducted. if so what is the end amount i should receive. Thank you to anyone who could help clarify

To clarify your terminology, in the situation you describe, Jupiter or Fidelity (who run the fund) are the 'fund management company' and Hargreaves Lansdown (who run a service through which you place your orders to buy or sell) are the 'funds platform'.

If it's a Jupiter or Fidelity fund that's an OEIC, single-priced, (instead of a dual priced fund which has a buy and sell price), the management company only publish one price each day. They put that one price on their website after they've calculated it and generally in other news/ information services like Financial Times or Trustnet, and everyone who has given them sufficient notice that they want to subscribe to the fund or redeem out of the fund on that dealing day will buy or sell shares/units at that published price.

However, that single published price isn't always the exact same as the NAV of the fund would have been if there were no orders at all (or of there were no net contributions or redemptions because the cash from buyers/joiners exactly matched the cash going to sellers/leavers). It's feasible that they may 'swing' the price up a little bit if there is a large amount of net new subscribers (so that the new joiners bear some of he costs of issuing the units and buying assets with the new money), or swing it down a bit if there is a large amount of net leavers (so that the leavers bear some of the costs of selling assets and redeeming the units). But even if they do, there is only one dealing price for the day, so if you are one of the leavers you will definitely get paid that one published dealing price for each share you are selling. Unless the manager has an exit fee he is allowed to charge.

You mention a commission charge on the amount you receive. If you are using a platform 'like Hargreaves' they do not charge any commissions to buy or sell an OEIC or unit trust They choose to make their money for running the find platform service by charging you a platform fee each quarter as a percentage of the value of the assets in your account. So at the time you are buying or selling, Hargreaves don't charge you any extra fee for themselves

If on the other hand you were using a platform with a different fee structure to hold and buy and sell your shares in Jupiter or Fidelity funds - such as IWeb for example- the platform might choose to make their money for running the platform service by charging fixed transaction fees on buying or selling, instead of quarterly or annual percentages on the holdings they administer. In that case, after the fund manager had determined the single dealing price for the day, you would get that price per share times the number you sold and then the platform's transaction fee or commission would be deducted. Whereas with Hargreaves there wasn't a platform transaction fee or commission to deduct because they just give you one big charge each quarter.

Finally a note about your example where you mention the holding on that day being worth £2500. If there's a single dealing price, and no exit charge from the fund manager, and the number of shares you are selling times the dealing price at the time the manager redeems your share is £2500, then £2500 is the amount you'll get, reduced by any platform transaction fee (which would be £nil on Hargreaves Lansdown but not necessarily £nil on other platforms with different agreed fee structures).

But important to understand is that all daily priced, open ended funds such as OEICs and unit trusts are always dealt at a price calculated *after* you place the order. If you see that your Jupiter shares are worth a grand total of £2500 today and place an order now to sell them, you won't necessarily get £2500, because the value of your holding by the time they run the calculations tomorrow might not be £2500 any more. You will just be joining a pile of orders to be processed at the next dealing point, and get a price based on that dealing price rather than the last published one you saw before placing the order. So nobody can tell you what shares currently worth £2500 can be sold for.

Obviously if £2500 is a small portion of your shares in the fund (e.g. you have £10k-worth), you can just place an order to redeem £2500 worth, and after they next calculate that 'single dealing price' figure they will just redeem the appropriate number of shares to get you £2500 of proceeds, and the only thing which would reduce that figure net to you would be if your fund platform operator had their own explicit fee for doing a sale transaction for you - which someone like IWeb does but someone like Hargreaves does not.