Query about initial charge / spread

[paulnumbers]

Hi,

I'm not really a fund user, just trying to help out my old man who is.

I was looking at the following fund "Artemis Income Class I - Accumulation"

And Hargreaves Landsdown (HL) provide the following on the price

On 3 February 2017 the price was: 413.03p to buy, 406.09p to sell.

So is this difference between the buy and sell price effectively the same as an initial charge? I thought initial charges had gone the way of the dodo? If so, who is making the money on the spread, as I would assume as held in ISA's HL's can net off buy/sells between customers and not actually tell Artemis that a customer has bought/sold. So are HL pocketing the difference?

Or am I completely misunderstanding?

Thanks.
Paul

[tjh290633]

Some funds have dual pricing, bid and offer, while others (usually OEICs) have single pricing.

With single pricing, there may be an additional initial charge or an exit charge, reducing to zero over the first few years, often 5. With dual pricing the initial charge is accounted for by the spread between bid and offer prices.

TJH

[greygymsock]

the difference between those buying and selling prices is c. 1.7%.
the HL page also says: 1% initial charge, and 1% initial saving from HL.
that implies that you get 1% out of the 1.7% back, so you only lose about 0.7%.

i don't know whether HL can save you any of that 0.7% by matching buyers and sellers of the same fund on the same day among their clients. i don't think they can keep any of the 0.7% for themselves, since platforms are now obliged to use explicit pricing only.

supposing the 0.7% reaches artemis, it should be going into the fund, to cover the underlying costs of buying new investments with new money (e.g. 0.5% stamp duty). however, if the fund manager is able to match buyers of units in the fund with sellers on the same day, then there is no cost of buying new investments. in that case, apparently the fund manager *is* then allowed to keep the money (which is called "box profits"), though not all managers do. i don't know about artemis specifically.

[paulnumbers]

the difference between those buying and selling prices is c. 1.7%.
the HL page also says: 1% initial charge, and 1% initial saving from HL.
that implies that you get 1% out of the 1.7% back, so you only lose about 0.7%.

i don't know whether HL can save you any of that 0.7% by matching buyers and sellers of the same fund on the same day among their clients. i don't think they can keep any of the 0.7% for themselves, since platforms are now obliged to use explicit pricing only.

supposing the 0.7% reaches artemis, it should be going into the fund, to cover the underlying costs of buying new investments with new money (e.g. 0.5% stamp duty). however, if the fund manager is able to match buyers of units in the fund with sellers on the same day, then there is no cost of buying new investments. in that case, apparently the fund manager *is* then allowed to keep the money (which is called "box profits"), though not all managers do. i don't know about artemis specifically.

Thanks greygymsock, this dual pricing / single pricing was something I hadn't come across before. That all seems to make sense.

ta
Paul

[mc2fool]

The HL Guide to Fund Prices, Savings and Yields may help... (although I'm not promising ... )