Fund pricing explained
Understanding how fund prices are calculated and when they are published can be useful when viewing valuations or deciding when to put money in or take it out.
2 min read
Fund pricing explained
When you are planning your finances it can help to understand how fund pricing works. Whether you are thinking about topping up an investment, realising some of your capital, or simply wanting to understand more about how pricing works, it can inform you about what to expect and how to read your valuations.
It’s generally a simple process to invest or withdraw money from Coutts funds, but there are some technical points around the pricing that are worth being aware of. These can be particularly important when markets are moving quickly – in some circumstances this can mean that the price you see when you decide to buy or sell is not the same as the price you’ll actually get.
Here’s what we think it’s important to know.
What does the fund price represent?
The price of a fund is equal to the underlying value of all the assets minus any outstanding liabilities – this is called the net asset value, or NAV. When the value of the securities in the fund goes up, the NAV goes up. When the value of the securities in the fund goes down, the NAV goes down.
We use the NAV to set the price at which investors can buy or sell a fund.
How is the NAV set?
Calculating how much a fund is worth can be a complicated process, depending on the assets held by the fund. This usually means:
- for directly held shares in companies and directly held bonds prices are taken from stock and bond markets
- for third-party funds investing in stocks or bonds – the fund manager provides us with the value
- any outstanding liabilities the fund may have – for example fees or charges related to the underlying funds we invest in – are then also taken into account
The NAVs are calculated for us by the fund’s administrator, Bank of New York Mellon Fund Services. They make sure that the valuation process is robust and independent.
At 11pm each business day, the NAV for the Coutts Multi-Asset Funds and Coutts Invest funds is set - or ‘struck’. These are then published in the market – on coutts.com, for example, or fund information websites like Morningstar.com – at around 2.30pm the following day.
If you have any doubts or questions about fund pricing or any other issues relating to your investments, please get in touch with your Coutts wealth manager before you make a transaction.
What happens when I decide to buy or sell a Coutts fund?
When you ask us to buy or sell a fund, your instruction goes into our internal trading system and is processed automatically.
Our system gathers all trades at 2pm, and they are processed at the NAV calculated at 11pm that night. All trades received before the 2pm cut-off point are priced using the same NAV.
The 2pm deadline is important. If you tell us you want to trade after 2pm, your trade won’t be executed until the next day.
Why would the price on coutts.com be different from the price I get?
Any trade you tell us about before 2pm is made at the price published at 11pm that night, based on revised valuations of the assets. If it’s after 2pm when you tell us you want to trade, you’ll get the price published at 11pm the next day. This may be different from the price available on coutts.com when you decided to make the trade.
For example, let’s say you decide to sell a proportion of your fund on Tuesday:
- The price you see on coutts.com at the time you tell us you want to make the trade will be based on the NAV calculated at 11pm on Monday night
- If you tell us about your decision before 2pm, you’ll receive the NAV struck at 11pm on Tuesday night
- If you instruct us after 2pm on Tuesday, you’ll receive the NAV struck on Wednesday at 11pm
Typically, there’s unlikely to be a big difference between the price you see on coutts.com when you decide to buy or sell and the price you get. But if there’s a big market-moving event on Tuesday afternoon – like a surprise interest rate cut or an unexpected trade deal – this news could affect the NAV of the fund significantly in just a few hours.
Not sure what to do? Get in touch
If you have any doubts or questions about pricing or any other issues relating to your investments, please get in touch with your wealth manager before you make a transaction.
When investing, past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment.
We’re committed to supporting clients who may be affected by coronavirus and have robust plans in place to minimise any disruption to our service.