The ‘swing pricing’ is gaining adherents in the Spanish industry of investment fund management. Liberbank Gestión has announced that it is beginning to apply this “valuation adjustment” tool to eight of its vehicles. Bestinver premiered the practice a week ago and more and more companies are considering its incorporation.
The board of directors of the Liberbank management company has approved the use of purchase or sale prices for the vAllocation of positions held in portfolio, and additionally, exceptionally, the realization of net asset value adjustments, through the mechanism known as ‘swing pricing’.
These adjustment measures are applied in the investment funds Liberbank Ahorro, Liberbank Capital Financiero, Liberbank Global, Liberbank Mix-Renta Fija, Liberbank Renta Fija Flexible, Liberbank Renta Variable España, Liberbank Renta Variable Euro and Liberbank Rentas. This is stated in the relevant facts sent to the National Securities Market Commission (CNMV) this Tuesday.
That’s how it works
The purpose of this mechanism is “to pass on to the participants of the fund that could cause significant entry or exit movements the additional costs that may be incurred to adjust portfolios for these movements, and under exceptional market circumstances where the valuation with purchase or sale quotes does not adequately reflect the real prices at which the operations could be executed. “
With small technical differences in each signature, it consists in that on a day in which the reimbursements are in the majority, the net asset value to be received by those who withdraw from the fund is reduced based on a predetermined and public price factor. Conversely, if the subscriptions are more, the entry net asset value is increased based on this factor. That yes, the change can take place always or from certain volumes of negotiation, as it is the case of Liberbank.
As it goes in the essence of this tool, it is specified that these settings “will not have any impact on the investments of those participants who do not carry out operations on the dates in which they are carried out. “In addition, they do not require action by the participant, nor do they have any impact on the investment policy, the risk-return profile, nor on the costs of the investment funds to which are applicable.