Hi
I have some questions regarding the calculation process of the unit price stated in chapter 13 Unit Pricing (SP2 CMP 2021 p8 Ch13).
Let's take the appropriation price as an example, from the described process, my understanding is as follows:
+ Six bullet points mentioned there refers to the calculation of the
Net Asset Value (NAV) of the fund. The number of units is known with certainty at the valuation time.
+ The expenses mentioned in the second bullet refer to the expenses incurred due to the purchase of the new assets only, not the expenses incurred from the purchase of the current assets held by the fund (as they were already purchased).
+ Therefore, the
Net Asset Value of the fund is not only influenced by the performance of the assets held by the fund, but also
by the transactions that occurred within the period. For example, considering 2 cases: (1) the money in is 1000 and the money out is 300, giving the net money in of 700; and (2) the money in is 2000 and the money out is 500, giving the net money in of 1500, assuming that the transaction cost is 3% of the asset value, then the expenses incurred in (2) should be higher than in (1). Thus, the
NAV in (2) should be higher than that in (1).
Regarding the third point above, I believe that the bid price is affected by the choice of 'offer basis' or 'bid basis'. Is this the same as saying that
the transactions that occurred within the valuation period can affect the unit price calculated? For example, if the net position is contracting rather than expanding, then the NAV should definitely be different, even if the performance of assets remains the same.
Also, one further problem that I am not clear is that if my above interpretation is true, then the interest of the unit-holders, which is reflected by the unit price, is actually affected by the transaction of the unit that they were not involved in.
Thank you very much for your answers
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