Open-ended mutual funds, unit trusts and OIKs pool money from lots of investors to buy a portfolio of investments. 

The price of these assets fluctuates, as does the size of the fund as investors buy and sell shares.  

 Pricing a fund in a way that is fair to investors is complex. Here are the basics. 

  How is the fund price calculated? 

A fund’s price is based upon the value of its assets – shares, bonds, property – it owns. The calculation includes. 




Assets may have a bid/offer spread – the difference between the cost of buying or selling a share in a company. The spread may be very small on widely traded stocks, or significant on small, illiquid stocks the spread can be significant. 


Transaction costs. 


External costs, including commissions, transfer fees and stamp duty. Costs vary widely, depending upon the type of asset and where they are. 


Initial charge. 


Applied by the fund manager for setting up the investment, although often fully discounted. 


There is a buying and a selling price for every fund. The quoted price depends on the pricing method. 


Pricing methods 


Managers seek to treat investors fairly whether they are buying into, or selling out of a fund, or staying invested. 

Ordinarily, the costs for buying or selling assets are taken from a fund’s capital.  When the fund expands or contracts due to investor flows, additional transaction costs may arise. 


Single-priced funds 


Most OEICS and some unit trusts operate on a single-price basis; investors can buy or sell shares from the fund manager at the same price. 

The price reflects the mid-point of the buying and selling point of the fund’s assets. The ‘net asset value per share’ is the fund’s assets less its liabilities, divided by the number of shares. 

Single pricing works well when the number of shares bought or sold is small compared to the size of the fund. 

In the instance of significantly higher volumes, the fund manager can impose a ‘dilution adjustment’ to protect existing investors, by transferring costs to those joining or leaving. 


Dual-priced funds 


Some funds are dual-priced with a buying, quoted offer, price and a selling, quoted bid price. The difference is known as the spread. 

The price at which you buy units, or shares (the offer) reflects the buying price of the fund’s assets plus any transaction costs and initial charge. 

The price you sell at (the bid) reflects the selling price of the fund’s assets less any transaction costs associated with selling. 

On any given day the offer price is higher than the bid price. 

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