Managed Funds When selling, which units actually get sold?

Discussion in 'Shares & Funds' started by BSB, 1st Dec, 2005.

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  1. BSB

    BSB Active Member

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    Consider the following scenario:

    Over a period of 2 years you have purchased $1000 worth of managed fund units every month. You then decide to cash in on some of them and sell $5000 worth.

    Does the sales process work like shares in that the units with optimal tax considerations are sold first? (i.e Perhaps those held for over 12 months (hence reduced CGT) are selected first or maybe some where you have made a capital loss are selected...)

    Is the selection made by the Fund Manager or is that something you can decide on when doing one's tax return and can select a parcel that best suits at that time?

    Thanks.
     
    BSB, 1st Dec, 2005
    #1
  2. Ol School Skata

    Ol School Skata Well-Known Member

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    as a guess...

    I would say the managed fund would probably keep a small amount in cash to deal with withdrawals like this. For the small funds, it may be 2 - 5 %, for the larger funds ($100M or higher) it may be as little as 1% or lower. I guess there are dollars going into the funds on a daily/weekly basis so a net balance is worked out...

    Just a guess - could be miles out tho but it would make sense for an efficiency point of view.

    For the larger withdrawals i guess they would be selling down shares in whatever the most efficient manner is

    OSS

    Whoops...I misunderstood your question.

    When you sell them i believe as Sim says, FIFO so when you sell them you sell the ones your acquired first in date order.
     
    Last edited by a moderator: 1st Dec, 2005
    Ol School Skata, 1st Dec, 2005
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  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    My understanding with investments like these is - if you can clearly differentiate between the shares or units, then you can effectively choose which you are going to be selling. However if you can't differentiate between them (which I would suggest is the case with most managed funds including NavraInvest), then it is treated simply on a FIFO basis (first in, first out). That means you are selling the oldest units first.

    Nick might have more information here.
     
    Simon Hampel, 1st Dec, 2005
    #3
  4. Glebe

    Glebe Well-Known Member

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    Sim's right, and thankfully it's the most tax efficient way.
     
    Glebe, 1st Dec, 2005
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