A question of trust

By This Is Money
Updated:

 

IS it true that unit trust fund managers often reduce bid prices at which you sell in order to protect the interests of their shareholders? I have heard they do so to discourage investors from selling their investments back during volatile times such as these. RF, Worcester

Patrick Connolly from independent financial advisers Chartwell Investment says: Unit trust managers can reduce the bid price at which you can sell you holdings in order to discourage investors from selling.

This is called pricing the funds on a 'full-bid basis' and is used to protect existing unit holders during times of extreme market volatility.

An example of this would be immediately after 11 September, when the spread between the buying and selling price on underlying shares increased substantially.

As a result, unit trust managers valued stocks at their cheapest possible price to discourage investors from selling.

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