Managed Funds How many new units?

Have a situation for those in the know:

Let's say an investor puts $136,000 into Navra with a margin of 50%, meaning they got a $136,000 margin loan. So the total amount invested is $272,000. They receive a distribution from Navra of approx. $13,000 which is re-distributed back into the fund.

For ease of the example, let’s say the unit price on the day they buy back in is $1.09 and that they bought the original units at $1.18 (just as an example). What I would like to know is:

- how many new units would they get at $1.09 if they margined the entire amount to 60%? That is, the original amount of $136,000 plus the $13,000. How is this calculated?

Mark

 

Sim,

You're a champion! Thanks for that.

Mark

 

Sim,
I can follow most of what you wrote but you lose me at the end...
as i understand it.. if mark buys an extra $22,552.54 worth of units, the loan indeed goes up to $158,552.54 ($136,000 + 22,552.54) but the total fund value will now go up as well from $264,254.24 to $286,806.78 ($264,254.24 + $22,552.54) and the LVR will be 55.28% not 60%.
this is how i calculate it (let me know if i'm wrong and where):
$264,254.24 (current value of fund)
-$136,000.00 (what you owe the margin lender)
=$128,254.24 (this is YOUR share of the total value at the current unit price)

if you now want to margin this at 60% then:

$128,254.24 / 0.4 = $320,635.60 (this is the new total value of money invested)
so,
$320,635.60 (new total value of fund)
-$128,254.24 (YOUR share of this new total value)
=$192,381.36 (margin lender's share of new total value)

ie you will borrow an extra $56,381.36 (on top of the original $136,000.00) to bring the LVR (at current unit price) to 60%.

here it is:
$192,381.36 (margin lender's share of new total value)
/$320,635.60 (new total value of fund)
= 60%