Greencoat KIDs

[eepee]

The other day I went and bought Greencoat UK Wind and on the purchase page I had to tick a box I have never come across before.

Examining the horror chart that the purchase generated, I realised that I had purchased a fund for the very first time.

This gives figures for Ongoing and Transaction charges which are paid annually.

What I want to know is what happens if I sell them before the year is up?

Do I go by the Bid price or do I aditionally have to consider a proportion of the declared charges?

Regards,
ep

[mc2fool]

The other day I went and bought Greencoat UK Wind and on the purchase page I had to tick a box I have never come across before.

Examining the horror chart that the purchase generated, I realised that I had purchased a fund for the very first time.

This gives figures for Ongoing and Transaction charges which are paid annually.

What I want to know is what happens if I sell them before the year is up?

Do I go by the Bid price or do I aditionally have to consider a proportion of the declared charges?

Regards,
ep

You go by the bid price. All the charges etc in the KID, that you now have to certify you've read, are internal to the investment trust.

[Alaric]

Examining the horror chart that the purchase generated, I realised that I had purchased a fund for the very first time.

It's an Investment Trust which as a collective investment has these rather useless declarations and disclosures imposed on it. It's also a quoted instrument which means if you sell, you will get what a market maker will pay for it, less any commission they might charge.

[eepee]

Thank you both.

It does raise another question.

What is the advantage of buying into a trust, especially one limited to (presumably) one type of product where the yield is given at a healthy over 5% yet the charges virtually halve that? Surely in the yield tables they should indicate the lower figure?

Regards,
ep

[Alaric]

What is the advantage of buying into a trust, especially one limited to (presumably) one type of product where the yield is given at a healthy over 5% yet the charges virtually halve that? Surely in the yield tables they should indicate the lower figure?

With Investment Trusts, figures for net asset value, actual dividend yield, total return etc. are always shown based on what a holder receives, after charges in other words. Be aware as well that the rules require ITs to add together charges for expenses and interest on borrowings, thus making a useful disclosure of neither. An advantage of ITs is that being closed end funds they can invest in assets that aren't easily valued or realisable. OEICs as discovered by investors in the Woodford funds can have problems if people want to sell when the fund holds illiquid assets.

[scotia]

OEICs as discovered by investors in the Woodford funds can have problems if people want to sell when the fund holds illiquid assets.

However, as far as returns on investment are concerned, the investors in the Woodford IT were even worse off! The OEIC investors got about 70% back - and the IT investors got about half of that!

See https://www.lemonfool.co.uk/viewtopic.php?t=27323#p377145

[Dod101]

OEICs as discovered by investors in the Woodford funds can have problems if people want to sell when the fund holds illiquid assets.

However, as far as returns on investment are concerned, the investors in the Woodford IT were even worse off! The OEIC investors got about 70% back - and the IT investors got about half of that!

See https://www.lemonfool.co.uk/viewtopic.php?t=27323#p377145

Yes but with respect that is a red herring as far as the OP is concerned. He is investing in Greencoat not a Woodford fund and The Woodford trust was manipulated anyway by the OEIC off loading a lot of stuff (unquoted wasn't it?) to the IT.

If I were the OP I would tick the box to say you have read the KID and then ignore it. He can find out all he needs to know from the Annual Report of Greencoat and the daily figures on yield etc.

Dod

[DavidM13]

What is the advantage of buying into a trust, especially one limited to (presumably) one type of product where the yield is given at a healthy over 5% yet the charges virtually halve that? Surely in the yield tables they should indicate the lower figure?

With Investment Trusts, figures for net asset value, actual dividend yield, total return etc. are always shown based on what a holder receives, after charges in other words. Be aware as well that the rules require ITs to add together charges for expenses and interest on borrowings, thus making a useful disclosure of neither. An advantage of ITs is that being closed end funds they can invest in assets that aren't easily valued or realisable. OEICs as discovered by investors in the Woodford funds can have problems if people want to sell when the fund holds illiquid assets.

Well said.

CTY for example is forced to disclose a fee of 0.81% in its KID, when 0.45% of it isn't going in to the managers yacht fund but is being used to support its leverage. On what planet does forcing firms to lump in to exactly the same pot what is basically an investment decision with management fees seem a good idea. Of course if you want to see the cost of the debt (ie. interest rate and time to maturity) then you can look at the difference between the Par and Fair NAV. It isn't reflected in the KID charge. All very unsastisfactory.

[Alaric]

On what planet does forcing firms to lump in to exactly the same pot what is basically an investment decision with management fees seem a good idea.

It was an EU Directive, but one influenced by the FSA. Repeal or replacement by something more useful is likely not on any Government list.

There's a perverse effect that British investors remain free to invest in shares on American stock exchanges but not collections of these shares in the form of US quoted ETFs. That's down to an absence of KIIDs for collectives based outside of Europe.

[Spet0789]

Thank you both.

It does raise another question.

What is the advantage of buying into a trust, especially one limited to (presumably) one type of product where the yield is given at a healthy over 5% yet the charges virtually halve that? Surely in the yield tables they should indicate the lower figure?

Regards,
ep

Two points.

Firstly, the 5% dividend yield is post costs. This will be the case for every collective investment scheme.

Secondly, included in the 2% of costs shown on the KID are 0.66% of financing costs - interest paid on the debt incurred by UKW. So not a charge or fee in any meaningful sense.