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Introductory fund charges and transaction costs
Further information about fund charges and costs in the Merian Global Investors UK-authorised fund range
When investors use a fund to invest in financial markets there is a charge, payable by the investor, for the running of those funds. All such fund charges must be disclosed in a standard format in the key investor information document (“KIID”).
In common with other types of investments in financial markets, a fund will incur “transaction costs” in the process of buying and selling the underlying investments as necessary to achieve its investment objectives. A significant proportion of these costs are recovered directly from investors joining and leaving the fund. Therefore, these transaction costs affect a fund’s investors in different ways, depending on whether they are joining, leaving or continuing with their investment in the fund.
Also referred to as the “initial charge”. This is the maximum amount that might be taken out of your investment before it is invested in one of our funds (in some cases, it might be less than this figure) and covers the cost of setting up your investment. For example, if you invest £1,000, an entry charge of 5% means that £950 of your money will be used to buy units in a fund. A percentage of the entry charge may be paid to intermediaries including platforms or execution-only brokers.
The entry charge for our funds can be found in each of the KIIDs.
Also referred to as the “redemption charge”. This charge is taken from the value of your investment before it is sold and the proceeds paid to you. Our UK authorised funds do not currently have an exit charge.
We do not charge performance fees on any funds within our UK authorised fund range.
The ongoing charges figure (“OCF”) is based on the expected total of the charges taken over a 12-month period. The actual fees and expenses incurred each financial year are detailed within the annual report for each fund. The OCF includes the costs associated with the management, operation and administration of the fund. The OCF excludes portfolio transaction costs, except in the case of an entry/exit charge paid by the fund when buying or selling units in another collective investment scheme. The OCF may vary from year to year.
The OCF is available at a share class level for each fund in the relevant KIID. In addition, the OCF will be published in each interim and annual report.
Fixed ongoing charges
All of our UK-authorised funds operate with a Fixed Ongoing Charge. The OCF for these funds will, under normal circumstances, be equal to the Fixed Ongoing Charge. The Fixed Ongoing Charge is a single fixed percentage fee paid to the management company out of the property of the fund. The management company will pay the fees and expenses relating to the management, operation and administration of the funds, with the exception of certain costs which may be paid by the fund and are listed in the Prospectus.
In some periods, the Fixed Ongoing Charge may be less than the costs actually incurred by the management company. In these circumstances, the management company will pay the difference from its own resources. Conversely, in some periods the Fixed Ongoing Charge may be more than the costs actually incurred by the management company. In these circumstances, the management company will retain the difference. The Fixed Ongoing Charge is designed to provide shareholders with certainty as to the ongoing costs associated with investing in the funds.
The management company may change the Fixed Ongoing Charge where it reasonably considers this to be appropriate, but the Fixed Ongoing Charge can only be increased after providing investors with 60 days’ notice of the change.
When funds buy or sell investments certain transaction costs are incurred.
With effect from January 2018, all of the funds in our UK authorised fund range operate with a “swinging single price”. This pricing methodology is designed to protect your investment from the impact of transaction costs that arise when other investors join or leave the fund.
Under this methodology, once a fund’s single price is determined, net contributions or withdrawals above a certain level may trigger an adjustment to the price (a “dilution adjustment”). The amount of any such adjustment is calculated by reference to the estimated costs of dealing in the underlying investments, including any dealing spreads, broker commissions and taxes. The extent of the adjustment will vary according to the underlying assets of the fund. The estimated percentage impact of these adjustments is detailed in the prospectus for each of the funds, though you should note that the actual adjustment may vary from these estimates.
The adjustment to the price is normally made if the impact of the value of the net contributions or withdrawals is considered significant; this helps to protect ongoing investors from the impact of any resultant transactions. It is not possible to accurately predict how frequently the manager of a fund will need to make such an adjustment as it is dependent on the contributions and withdrawals (otherwise known as the inflows and outflows).
Additional disclosure of costs associated with buying or selling investments
On average, over the last three financial years (or since inception for funds which are fewer than three years old), the funds incurred broker commission and stamp duty costs as a percentage of the NAV as noted in the table here. These costs are incurred in the process of buying and selling underlying investments as necessary to achieve the investment objectives of each fund. A significant proportion of these costs are incurred as a result of investors joining and leaving the funds.
In the case of shares, broker commissions and taxes are paid by the funds on each transaction. In addition, there is a dealing spread between the buying and selling prices of the underlying investments. Unlike shares, other types of investments (such as bonds, money market instruments and derivatives) have no separately identifiable transaction costs; these costs form part of the dealing spread. Dealing spreads vary considerably depending on the transaction value and market sentiment.
Comparing portfolio transaction costs for different funds may give a false impression of the relative costs of investing in them for the following reasons:
Transaction costs do not necessarily reduce returns. The net impact of dealing is the combination of the effectiveness of the manager’s investment decisions in improving returns and the associated costs of investment.
Historic transaction costs are not an effective indicator of the future impact on performance.
Transaction costs for buying and selling investments due to other investors joining or leaving the funds may be recovered from those investors. For further information refer to the swinging single price policy note above.
Transaction costs vary from country to country.
Transaction costs vary depending on the types of investment in which a fund invests.
As the manager’s investment decisions are not predictable, transactions costs are also not predictable.
View a detailed breakdown of our UK authorised fund range costs and charges in the table.