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How is my unit trust priced?
Key takeaways
- The fund is divided into equal portions called units or participatory interests.
- The price of each unit – known as the net asset value (NAV) price - depends on the market value of the shares, bonds or other securities the fund holds.
- The price of the units, or NAV price, is calculated daily.
- The expenses incurred in buying and selling shares, paying the fund manager, auditing the fund, and creating units, is deducted from the value before the unit price is determined.
- South African unit trusts use forward pricing, which means your units are sold at the NAV price determined the next time the fund NAV is set.
The total value of a unit trust fund is divided into equal portions called units or participatory interests. When you invest your money in a unit trust you buy a portion of those units, depending on how much you invest and the price of the units at that point.
The unit price depends on the market value of the shares, bonds or other investments in which the fund is invested.
The price of each unit is referred to as the net asset value (NAV) and is calculated daily as the prices of the underlying investments change on the stock, bond or money market each day.
The Collective Investment Schemes Control Act sets out a list of expenses incurred by a fund that can be deducted from the value of the portfolio before the NAV is calculated.
These expenses include:
- The costs of buying or selling of the securities, such as brokerage and marketable securities tax;
- Auditor‘s fees, bank charges, trustee and custodian fees;
- Fees paid to the Registrar of Companies for the creation of shares;
- The costs of creating units for collective investment schemes in property;
- The fees the unit trust management company charges; and
- The costs of listing on an exchange.
The unit prices of unit trusts are typically published on the unit trust management company’s website and they may also be published in newspapers and news sites.
South African unit trust companies use what is known as forward pricing. This means that your purchase or sale of units will be carried out at the NAV price calculated the next time the units are valued – so a price yet to be determined when you make your decision to buy or sell.
Many South African companies value their funds’ units at 15:00 and set an earlier cut off time, such as 12:00 or 14:00 for transactions. If your instruction to buy or sell comes in after that time, it will be processed at the next day’s price.
