We've seen how the FSA rules determine the highest price a buyer will ever have to pay for units in a trust. There are similar rules which make sure that a seller of units gets a minimum price.
As before, the calculation starts with the NAV of the trust's assets. From that figure, you deduct the notional dealing costs of selling the entire portfolio, divide the total by the number of units in issue, and round to four significant figures.
Example
The final figure is the minimum price at which investors can sell units back to the managers. It is known as the cancellation (or liquidation) price because it represents the full cost of cancelling or liquidating a unit.
The difference between the Creation (i.e. maximum offer) price and the Cancellation (i.e. minimum bid) price is known as the maximum bid/offer spread. It is normally expressed as a percentage of the creation price.
Example
Book offers!
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Quality Money Management
Andrew Kumiega, Benjamin Van Vliet |
| Our price: £41.39
Normally: £45.99 |
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Public Private Partnerships
E. R. Yescombe |
| Our price: £42.49
Normally: £49.99 |
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Extraordinary Popular Delusions and the Madness of Crowds
Charles Mackay |
| Our price: £9.90
Normally: £11.00 |
