Understanding the differences in tracker funds

[Pipsmum]

I've just been looking at tracker funds for the FTSE 100 within HL as the investment platform.

I do not understand the differences between their pricing if they're all doing the same thing... or are they?

Unbundled funds:
HSBC FTSE 100 Index (Class C) Income = Cost 93.75p - Yield 4.69% - bi-annual divi - Charge 0.18%
HSBC FTSE 100 Index (Class C) Accumulation = Cost 187.37p - Yield 4.69% - bi-annual divi - Charge 0.18%

Inclusive funds:
HSBC FTSE 100 Index Income = Cost 92.59p - Yield 4.59% - bi-annual divi - Charge 0.18%
HSBC FTSE 100 Index Accumulation = Cost 186.02p - Yield 4.59% - bi-annual divi - Charge 0.18%

Unbundled funds:
Vanguard FTSE 100 Index Accumulation = Cost 9,845.11p - Yield 4.63% - annual divi - Charge 0.06%
Vanguard FTSE 100 Index Income = Cost 8,835.64p - Yield 4.63% - annual divi - Charge 0.06%

Could anyone make sense of these for me please? If the divi is paid per share then you'd only get 1 share with the expensive ones but lots for the cheaper. I realise I'm missing something important in that. I don't even understand bundled or unbundled.

Any enlightenment very welcome. Or if there is a better tracker to be had in these awful investment climate times.

[thirty06]

I'll have a shot at it.

The accumulation funds and the income funds are two different funds. Different accounts, separate. The price of the units is determined by how each individual fund is doing. Income funds pay money out, accumulation funds use the earned money (dividends and suchlike) to buy more of the constituents. If they started from the same price per unit, an accumulator will retain the money that the income fund paid out, so it will be worth more.

The dividend for a fund is per unit. I may be wrong about this, but I think that for OEICs like this you can just put in a round number and buy fractional units. So your dividend would be based on the number of units you owned.

I have forgotten what 'inclusive' and 'unbundled' mean.

As for a better tracker. A tracker should be a tracker, so, in theory, they can't be bette or worse.

[nmdhqbc]

I've just been looking at tracker funds for the FTSE 100 within HL as the investment platform.

A major benefit of passives is the low charges. At 0.45% HL's charges can wipe out that benefit for larger amount of money. Somewhere like iWeb charges £5 a trade instead of any % based charges. You could buy an ETF with HL and pay £11.95 a trade instead. A whole other thing to learn about

I do not understand the differences between their pricing if they're all doing the same thing... or are they?

I'm sure there's some nuances that are beyond my level of knowledge but I'd just go for the ones with the lowest charges.

Inclusive vs Unbundled...
https://www.hl.co.uk/help/funds-shares- ... dled-funds

Accumulation units - the dividends are kept into the NAV (like automatically re-investing the dividends)
Income units - income paid out.
I prefer income units as you can use the income to help re-balance your portfolio. Also easier to deal with on tax returns if held outside of a tax shelter. With the acc units you need to separate capital returns from dividends in the tax forms. Something I could never be bothered to learn about so I just stick to income units.

Vanguard FTSE 100 Index Income = Cost 8,835.64p - Yield 4.63% - annual divi - Charge 0.06%

Yield is a % so number of units you hold is irrelevant. If it yields 5% the day you buy and you buy £100 worth you'd get a dividend of £5.
I would not trust the yield info here. Price/NAV of fund on 26MAR=8835.64p, dividends paid per unit in last 12 months=478.5p (data from Trustnet link below). So the historic yield on 26th march price is 478.5/8835.64 = 5.42%. Forward yield is another question altogether. Looks like it will be significantly lower since lots of dividends are being cut.
https://www.trustnet.com/factsheets/o/n ... -a-inc-gbp

[JohnB]

Tracker funds have something called tracking error, which shows how much they differ from their index. A tracker can either hold the correct proportions of the index it tracks (100 different FTSE 100 shares, 350 FTSE 350 shares etc), or by synthetic, holding a representative sample. Either way they don't go out and buy a few shares everyone someone bungs them £1k, or sell a holding just because it drops out of the FTSE 100 (if they did people would take advantage of this), so they inevitably have discrepancies between their holdings and the index. Bigger, and better managed trackers normally have smaller tracking errors, but any of them can have a bad/good few months compared with their index.

And HL charge nothing for ETFs outside their ISA and SIPPs.

[JohnW]

or by synthetic, holding a representative sample. .

Not sure that's what synthetic means. If the ETF manager wants to guard against tracking error, she can make a contract with a counter party to correct any shortfall in tracking the index. The counter party may fail financially, leaving the ETF out of pocket. That's a risk of a synthetic fund. Some places limit how much of the ETF can be that dodgy. Essentially, they're using derivatives (a financial instrument derived from an asset).
If you can't store LPG in your office, but want to run a LPG ETF, you might do it synthetically. Again there's risk as you're not holding the asset I suppose.