On the 19/12/2018 the price of the Smooth Managed Fund was adjusted by -5% to be 99.75p.
Putting the Fund Price Adjustment into context
2018 has been a challenging year for most asset classes. Rising interest rates, global trade tensions, Brexit and Italian politics have all had a part to play and weighed heavily on investors’ minds. This has created a challenging backdrop for any multi-asset solution.
Just a reminder - what is a Fund Price Adjustment?
The price of the Smooth Managed Fund increases daily by the Smooth Growth Rate, which is equal to the BoE Base Rate plus 5% per annum net of fees.
Each day, the price of the Smooth Managed Fund is compared to the value of the underlying assets i.e. the Unsmoothed price. If the difference between the two prices is greater than 6.5% an adjustment is made to bring the Smooth Managed Fund within 1.5% of the Unsmoothed price.
Therefore, when markets perform poorly the underlying assets may lose value, which can trigger a downward Fund Price Adjustment. Equally, in an environment where markets are performing well we may see an upward Fund Price Adjustment.
This means that over a long-term time horizon, investors will receive similar performance to the underlying holdings. Crucially, however, the client’s investment journey will be much smoother because they are not exposed to daily price movements.