Buy Sell difference

[StOmer]

Hi,
I am looking at IT with a view to buying but the current spread is around 4% making it seem a costly transaction to me. I wonder what 'spread' between the buy/sell price would you find acceptable?

[Lootman]

I am looking at IT with a view to buying but the current spread is around 4% making it seem a costly transaction to me. I wonder what 'spread' between the buy/sell price would you find acceptable?

That is too wide for a liquid security but might be OK for a smallcap, AIM or thinly-traded issue.

I'd watch the bid-offer spread over a few days and at different times of the day, to see if you can determine a pattern.

Also, it can be useful to use limit orders for such instruments.

[scrumpyjack]

The spread can also be affected by the size of your deal. I often find I get a better overall price by putting in several buy orders, even though each attracts broker commission. This was the case yesterday with FCIT which is surprising as it is a very large trust.

[Lootman]

The spread can also be affected by the size of your deal. I often find I get a better overall price by putting in several buy orders, even though each attracts broker commission. This was the case yesterday with FCIT which is surprising as it is a very large trust.

Have you tried asking your broker if they have a block trading desk?

Your broker could then break your order down into components, as needed, without you doing that yourself. And they should be able to do that better than you can, if they are any good.

You can also specify "fill or kill", i.e. would you be happy with a partial execution or not?

Then there is just one commission, although of course ask them if they charge extra for doing this.

[scrumpyjack]

Yes I could try that next time. I use HL. I have used fill or kill before but I do prefer to control what I'm doing as I do it.

This time I was reinvesting some of the Greene Kind proceeds so it was rather a large amount and a one off situation.

[Gan020]

Hi,
I am looking at IT with a view to buying but the current spread is around 4% making it seem a costly transaction to me. I wonder what 'spread' between the buy/sell price would you find acceptable?

In general the spread is determined by the underlying liquidity. i.e. daily buy and sell volumes. The larger the volume the tighter the spread.

In addition often the actual spread when placing a trade will be smaller than the quoted spread, although more often that not skewed to one side.

4% is high. If you are happy to share the name of the IT I'm sure you will get a more detailed response

[richfool]

If it is a smaller or less mainstream IT, it will tend to have a bigger spread between the buying and selling prices.

It might also be worth comparing the spread on another IT in the same sector, (keeping in mind the differences in sizes of the trusts involved).

[StOmer]

Thanks for that, very useful and I will keep a watchful eye for any narrowing of the spread. I have read previously that this can change during the day and hopefully that will be the case. The IT in question is Hansa.

[monabri]

Thanks for that, very useful and I will keep a watchful eye for any narrowing of the spread. I have read previously that this can change during the day and hopefully that will be the case. The IT in question is Hansa.

They have a lot of faith in OWHL which represents ~25 % of the fund (I note this from page 8 of their factsheet...noting their definition of OWHL).

TOP TEN HOLDINGS (%)
Ocean Wilsons Holdings Limited (OWHL)* 24.9
Findlay Park American Fund 6.3
GAM Star Fund PLC – Technology 4.7
Vulcan Value Equity Fund 4.6
Select Equity Offshore, Ltd 4.5
Goodhart Partners: Hanjo Fund 3.8
Adelphi European Select Equity Fund 3.1
BlackRock European Hedge Fund 2.9
DV4 Ltd 2.8
Global Event Partners Ltd 2.5

Here's the AIC link for HAN.

https://www.theaic.co.uk/companydata/0P00008ZNH

Domicile Bermuda. 33% discount to NAV. Cover is zero.

Too racy for me.

[LittleDorrit]

Hansa A non voting (HANA) has always been more liquid than the ordinary shares (HAN).
To add or subtract a modest number from my holding of HANA I was quoted a spread of 0.75% this morning (177.67-176.34).

I would also suggest that the underlying portfolio since reorganisation in 2014 is far from racy - if interested read the managers presentations.

What has been relatively volatile is the discount- which is currently at a fairly high historical level.

[StOmer]

Thanks,
I saw HANA was a little better at just under a 4% spread, today it is showing 5p spread on 178 sell / 183 buy price for me. I find the managers' commentary and reports to be very informative and I do not see the IT as 'racy' myself. Since it moved from Global to the Flexible sector I am surprised that the discount has seemingly widened to around 35%.

[everhopeful]

There was an article in the FT on Saturday about ITs with substantial family ownership. Hansa was included as the Salomon family are major shareholders and are a part of the Board. Ocean Wilson holdings is a Brazilian infrastructure business and at 25% of the portfolio has a major impact on performance and also explains the large discount to NAV. Share price return over 5 years is 3% compared to 47% for the benchmark. Not for me.

[bruncher]

Hansa A non voting (HANA) has always been more liquid than the ordinary shares (HAN).
To add or subtract a modest number from my holding of HANA I was quoted a spread of 0.75% this morning (177.67-176.34).

I would also suggest that the underlying portfolio since reorganisation in 2014 is far from racy - if interested read the managers presentations.

What has been relatively volatile is the discount- which is currently at a fairly high historical level.

I'm reviving this thread as I have bought in a little over the past couple of years. The buy/sell spread is still awful, and worse for the Ordinary Shares than for the Class A non-voting shares. The A shares trade more frequently, perhaps because there are twice as many of them 80 Mn A shares and 40 Mn Ords.

The discount to NAV remains humungous - consistently around 40%.

At the Aug 2024 AGM, the Company was authorised to repurchase for cancellation up to 15% of the A shares. We shall see if that affects the discount.

[Dicky99]

Thanks for that, very useful and I will keep a watchful eye for any narrowing of the spread. I have read previously that this can change during the day and hopefully that will be the case. The IT in question is Hansa.

Out of interest when you say that the spread is 4% is that based on the buy/sell price reported on a casual online query or is it based on what your quoted when your actioning a trade?
So for example I've observed that if I consult my II account on the current price of GACA units it quite often shows a wide spread of say 3 or 4% between the buy and sell price but if I then action a trade, quite often the buy price quoted is say 1% or less over the sell price.

[bruncher]

Thanks for that, very useful and I will keep a watchful eye for any narrowing of the spread. I have read previously that this can change during the day and hopefully that will be the case. The IT in question is Hansa.

Out of interest when you say that the spread is 4% is that based on the buy/sell price reported on a casual online query or is it based on what your quoted when your actioning a trade?
So for example I've observed that if I consult my II account on the current price of GACA units it quite often shows a wide spread of say 3 or 4% between the buy and sell price but if I then action a trade, quite often the buy price quoted is say 1% or less over the sell price.

These are quotes from AJ Bell today

HAN : indicative (LSE) 240 : 216
Actual quotes Buy 236 Sell 216

HANA : indicative (LSE) 234 : 218
Actual quotes Buy 226 Sell 218

very small amounts