2.1.6.11 Indicate Re-computation of Fund Prices and Adjustment of Units
This topic provides information on indicating re-computation of fund prices and adjustment of units details.
The fund prices of funds like Employee Benefit Growth Fund are derived based on the forecasted rate of growth. The rates will be re-forecasted in the interim several times and the actual rate of growth is published at the end of the year.
If you choose the option Yes for Guaranteed Funds, the system will:
- Re-compute the fund prices and adjust the units to the investors based on the re forecasted rates during interim periods and actual rate growth during annual rate declaration time
- Share the residual units of investors who have left before interim/annual rate declaration time among the existing investors.
Example
Let us assume that a Fund (F100) is launched with the price of 10 ZAR with the forecasted rate of 10% per annum. Consequently, 10 * 10/ (100 * 365) = 0.0027 will be the increase in price till a new rate is declared. Please note that the price used here is an example and not the exact formulae as such.
Day 0 10 ZAR
Day 1 10.0027 ZAR
Day 2 10.0054 ZAR
Day 3 10.0081 ZAR
Day 4 10.0108 ZAR
Day 5 10.0135 ZAR
Day 100 10.27 ZAR
Day 101 10.2727 ZAR
Day 102 10.2754 ZAR
Day 103 10.2781 ZAR and so on….
If an investor invests on Day 2 the transaction will get unitized using the price 10.0054…
Assume these are trades captured on Day 2 @ 10.0054…
Table 2-20 UH ID Fund ID details
| UH ID | Fund ID | Subscription Amount (in ZAR) | Units |
|---|---|---|---|
| UH1 | F100 | 10,000 | 999.460 |
| UH2 | F100 | 20,000 | 1998.921 |
| UH3 | F100 | 30,000 | 2998.381 |
| UH4 | F100 | 35,000 | 3498.111 |
| UH5 | F100 | 25,000 | 2498.651 |
| UH6 | F100 | 15,000 | 1499.190 |
Assume these are trades captured on Day 100 @ 10.27…
Table 2-21 UH ID Fund ID details
| UH ID | Fund ID | Redeems Units | Redeems Proceeds (in ZAR) |
|---|---|---|---|
| UH1 | F100 | 100 | 1027.00 ZAR |
| UH5 | F100 | 2498.651 | 25661.15 ZAR |
Therefore, the balance of the investors in Fund F100 will be:
Table 2-22 UH ID Fund ID details
| UH ID | Fund ID | Balance (in Units) |
|---|---|---|
| UH1 | F100 | 899.460 |
| UH2 | F100 | 1998.921 |
| UH3 | F100 | 2998.381 |
| UH4 | F100 | 3498.111 |
| UH5 | F100 | 0 |
| UH6 | F100 | 1499.190 |
Let us assume that a Fund Manager revises an interim forecast of 11% instead of 10%. Consequently, all the trades that are unitized during the current fiscal year of the fund will be considered for impact and the units will be recomputed based on the new prices.
Day 0 10 ZAR
Day 1 10.003 ZAR
Day 2 10.006 ZAR
Day 3 10.009 ZAR
Day 4 10.012 ZAR
Day 5 10.015 ZAR
Day 100 10.30 ZAR
Day 101 10.3030 ZAR
Day 102 10.3060 ZAR
Day 103 10.3090 ZAR
After subscription, the adjustment for the investors in F100 will be:
Table 2-23 UH ID Fund ID details
| UH ID | Fund ID | Balance (in Units) |
|---|---|---|
| UH1 | F100 | 999.1008 (Difference in units - 0.3595) |
| UH2 | F100 | 1998.2020 (Difference in units-0.7190) |
| UH3 | F100 | 2997.3020 (Difference in units - 1.0784) |
| UH4 | F100 | 3496.8530 (Difference in Units - 1.2582) |
| UH5 | F100 | 2497.7520 (Difference in Units - 0.8987) |
| UH6 | F100 | 1498.6510 (Difference in units 0.5392) |
The adjustment due to redemption will be:
Table 2-24 UH ID Fund ID details
| UH ID | Fund ID | Balance (in Units) |
|---|---|---|
| UH1 | F100 | 99.7087 (Difference units 0.3595) |
| UH5 | F100 | 2491.3740 (Difference in units 0.8987) |
The new/actual Balances are:
Table 2-25 UH ID Fund ID details
| UH ID | Fund ID | Balance (in Units) |
|---|---|---|
| UH1 | F100 | 899.3921 |
| UH2 | F100 | 1998.2020 |
| UH3 | F100 | 2997.3020 |
| UH4 | F100 | 3496.8530 |
| UH5 | F100 | 6.3780 |
| UH6 | F100 | 1498.6510 |
Based on this condition, the system redeems certain number of units from each investor.
Table 2-26 UH ID Fund ID details
| UH ID | Fund ID | Balance (in Units) |
|---|---|---|
| UH1 | F100 | 899.3921 - 899.460 = 0.0679 |
| UH2 | F100 | 1998.2020 - 1998.921 = 0.719 |
| UH3 | F100 | 2997.3020 - 2998.381 = 1.079 |
| UH4 | F100 | 3496.8530 - 3498.111 = 1.258 |
| UH5 | F100 | 6.3780 – 0 = 6.378 |
| UH6 | F100 | 1498.6510 - 1499.190 = 0.539 |
The system will generate a redemption transaction for the above adjustment units excluding the Investor UH5 and will be available for reporting only in case of interim run. If it is on actual rate at the end of the year, the same will be shared with other investors proportionately.
When the next interim or actual run is executed the system will ignore these adjustment redemptions and while adjusting units these adjusted units will taken into account.
Parent topic: General Operating Rules