On 1 November 2007 a new price adjustment policy will be introduced for most funds in the offshore Fidelity Funds SICAV range to ensure a fair deal for all investors. The new policy will enable Fidelity to adjust a fund’s price on days when large amounts of money either come into or go out of the fund.
Why is the new policy necessary?
A large investment or redemption can lead to a temporary increase in the dealing costs that a fund has to pay. The dealing costs associated with buying and selling investments are paid by the fund – i.e. by all its investors. This can be unfair on those who have long-term investments in the fund and do not make frequent trades. The price adjustment policy (which is also known as Single Swinging Pricing) will ensure that the dealing costs resulting from large investments or redemptions can be allocated to investors trading on a particular day.
How does the policy work?
A threshold is set for the amount of money that can come into or go out of a fund in a single day. If this threshold is crossed, Fidelity will adjust the price at which all that day’s deals are carried out. If there have been high levels of investment coming into the fund, the price will be increased. On the other hand, if more money than normal has been leaving the fund, it will be decreased. This will protect the interests of long-term investors.
What will the threshold be?
The price adjustment policy will be activated if the day’s trading is likely to have the effect of decreasing the fund’s price by 0.05% or more.
How much will the adjustment be?
The adjustment will be based on an estimate of the dealing costs associated with the various types of investments held by the fund. However, the price of the fund will not be adjusted by more than 2%.
How often will the policy be activated?
This depends on levels of trading so it is likely to vary from fund to fund. It is worth remembering that the policy is designed as a response to volumes of trading that are out of the ordinary, so it is only likely to be implemented occasionally.
Who will monitor the policy?
The Board has set the policy and will be responsible for deciding when it is activated. It will also keep the policy under review to ensure that it is having the desired effect.
