253) Why My Unit Trust Fund Did Not Give Distribution?
Why my fund giving less distribution this year?
Why my fund distribution is giving less than the other fund?
Why No Distribution this month?
Is my fund not as GOOD as compared to the other fund?
Many Questions about a fund comparing to another fund. It reminds us of the old English Proverb
"The grass is greener on the other side"
When you compare different funds on the distribution, do take these points into considerations:
1) Financial Year End
A Unit Trust fund normally gives distribution on the fund's Financial Year End. If a fund did not declare a distribution last month, most probably that it is not its financial year end yet.
There are funds that give yearly, semi-annually, monthly or incidentally. It depends on the fund's distribution policy.
A Unit Trust Management Company will have different funds to have different Financial Year Ends. It is basically to avoid overcrowding or overloading all the funds reporting at the same time.
2) Distribution Policy
Every fund has its own distribution policy stated in the prospectus. Depending on the policy, distributions are paid out accordingly.
a) Annual - once a year on best effort basis
b) Semi-Annual - twice a year on best effort basis
c) Monthly - monthly on best effort basis
d) Incidental - depend on market performance
The Unit Trust fund give or not give any distribution is decided by the Fund Manager. It depends on the fund strategy, accumulated values, market conditions and future market outlook.
There are a few main fund types:
a) Equity
b) Mixed Asset/Balanced
c) Bond
d) Money Market
Depending on the fund types, the distribution policies are also different. Generally, Equity funds tend to have more incidental distribution policy. Bond and Money Market funds tend to have more Annual distribution policies.
3) Fund Price
The distribution amount to be paid out also depends on the current fund unit price.
You can expect a higher distribution amount from a higher fund price.
For example:
Fund A: $1.00 fund distribute out $0.05 is 5% of its fund price.
Fund B: $0.25 fund distribute out $0.05 is 20% of its fund price.
It will be more difficult to distribute 20% as compared to 5%.
Note: Distribution Yield is calculated as Distribution amount/Fund Price after distribution
Fund A Distribution Yield = $0.05/$0.95 = 5.3%
Fund B Distribution Yield = $0.05/$0.20 = 25%
As a summary, Distribution payment is not an indication of the fund's performance.
Check the fund's actual performance by reading the Annual Report and Performance Graphs.
Check the fund's actual performance by reading the Annual Report and Performance Graphs.
Distribution payment is more on the Fund Manager's fund management strategy.
Do focus on your:
a) Investment objectives
b) Time Horizon
c) Risk Profile
For more information, please consult your Unit Trust Consultant.
More related articles:
250) Distribution Yield vs Total Return
https://highlevelrules.blogspot.com/2020/05/250-distribution-yield-vs-total-return.html
132) Differences between Dividend vs Distribution.
132) Differences between Dividend vs Distribution.
No comments:
Post a Comment