Another way of acquiring unit trusts/OEICs is to swap other securities for them. This is a rather painless way of tidying up small holdings of shares.
The managers will normally stipulate a minimum value for a share exchange, but the value of the securities to be exchanged can usually be topped up with cash.
The share exchange represents a disposal of the unwanted securities at their bid value for CGT purposes. The bid value is invested in units/shares at the prevailing offer price (or single price + dilution levy + initial charge for OEICs).
Where the fund managers wish to take the shares into their own portfolios, enhanced terms may be offered for the exchange. For example, the bid/offer spread for the unit trusts could be waived and dealing charges on the securities to be exchanged can be absorbed by the fund.
Investors can switch one set of units/OEIC shares for another set in the same range of funds. Effectively this entails selling one set of units/shares and buying another set in different funds to the same value.
The sale of the first set of units/shares will take place at the bid price (or NAV - dilution levy for OEICs). This is treated as a disposal for Capital Gains Tax purposes. The purchase of the next set of units/shares takes place at the offer price (or NAV + dilution levy + initial charge for OEICs).
A fund switch between units/shares within the same range of funds usually attracts a reduction in the initial charge on the purchase element.
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