Unit Trusts: A Guide to Pricing and Fees
Understand how unit trust prices are based on NAV, the bid and offer pricing method, and typical management fees in Singapore.
What Determines the Price of a Unit Trust?
The price of each unit in a unit trust is based on the fund’s net asset value (NAV). Specifically, the unit price is calculated by dividing the fund’s NAV by the number of units outstanding. This means the NAV per unit serves as the underlying reference for pricing.
How Do Bid and Offer Pricing Work?
In the bid and offer pricing method, the subscription charge is added to the NAV per unit, while the redemption charge is deducted from the NAV per unit. This reflects the costs an investor incurs when buying or selling units.
Some funds use a single quote that directly reflects the NAV per unit, which simplifies the pricing display for investors. However, the bid and offer method separates the charges from the NAV, making the costs explicit.
What Are the Typical Management Fees?
Management fees vary by fund type. Actively managed funds typically charge management fees ranging from 1.0% to 2.0% per annum of the fund’s NAV. Passively managed funds generally charge management fees below 1% per annum.
These fees are a key cost component when evaluating a unit trust investment, as they are deducted from the fund’s NAV over time.
How Should Investors Approach Unit Trust Costs?
Before investing in unit trusts in Singapore, it is important to understand NAV pricing, fund costs, and the associated risks.