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Unit price reflection

Discussion in 'Managed Funds & Index Funds' started by rambada, 1st Feb, 2008.

  1. rambada

    rambada Well-Known Member

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    My question relates to unit price calculation as published on fund web sites.

    Firstly - Navra Fund. This is an income based fund. Does the income earned get reflected in the unit price? Or is the published unit price reflect capital value only?

    Second - Other funds. Same question regarding there dividends/distribution.

    Third - Shares. Pre-dividend the share price normally increases & then post distribution falls. Therefore a share price reflects capital value from trading on the stock exchange. The dividend is not 'part' of the published price, but does influence supply & demand. Are funds & particularly the Navra Fund the same?

    And as a follow up - if the capital value of the unit price is low, but the trading has been succesful, will there still be a distribution? Or does the fund manager hold back some distribution profit?

    And as a follow follow up - what actually determines how much the distribution is?
     
  2. Rod_WA

    Rod_WA Well-Known Member

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    Hope this helps.
     
  3. rambada

    rambada Well-Known Member

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    Thanks for the reply - I'm not looking to buy/sell com or ex dividend, just a question of wanting more understanding. Once again thanks for the reply, funds are murky waters for me & just filtering as I go. RE is so much easier!!
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Just to clarify a few of the responsese by Rod_WA:

    Yes, the unit price on any given day represents the total net asset value of the fund, including any undistributed profits to date. At distribution time, when those funds are paid out (or used to buy additional units), the net asset value of the fund will drop by the corresponding amount, hence the unit price drops.

    All unit trusts operate the same way - unit price includes undistributed income and realised and unrealised capital gains.

    A unit trust (managed fund) must distribute all net profits to unit holders at the end of the financial year. Up until that point, distributions are discretionary (eg, the fund manager can hold back some profit to be paid back later in the financial year - but no later than the end of the year ... as an example, Navra do this to smooth out the income distribution throughout the year).

    For the year, this is purely the sum of all net income (after costs and fees are taken out) earned by the fund plus net realised capital gains. For interim distributions, the amount of distribution may be somewhat arbitrary - this is why you sometimes see the first three quarterly distributions with round numbers (eg 3.2c/unit) and then the final distribution for the year with a lot more accuracy (eg 3.2145c/unit).
     
  5. Rod_WA

    Rod_WA Well-Known Member

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    Thanks Sim. As an aside, are all managed funds unit trusts? I know that trusts must distribute all income for the year, but is this the case for all funds?
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    That's a good question - I think the term "managed fund" generally refers to unit trusts ... but if you use the term "managed investment scheme", that generally has broader implications in relation to the structure used.

    I'm not sure how hedge funds are structured, and I'm sure there are other specialty funds which use a variation on the standard unit trust structure - but I don't know what they are or how they work.