Fund's net asset value(NAV) is the value of the fund's assets under management. It is defined as the difference between the value of assets and the value of the fund's liabilities - that is, upcoming payments for services provided to the fund.

As of the summer of 2011, according to the National Association of Managers, the total NAV of all Russian mutual funds exceeds 450 billion rubles, with more than 100 billion being open-end mutual funds, only 22 billion being interval funds, and the remaining almost 330 billion being closed-end funds.

The NAV is calculated on the basis of the Regulations on the procedure and terms for determining the value of the net assets of joint-stock investment funds, the value of the net assets of mutual funds, the estimated value of investment shares of mutual funds, as well as the value of the net assets of joint-stock investment funds per share, introduced by the Order of the Federal Service on stock markets No. 05-21/pz-n dated June 15, 2005.

According to this document, the fund establishes its own procedure for assessing assets at the level of its internal documents, but within the framework of the regulations.

In this case, the value of assets is determined as follows. For securities traded on exchanges, the weighted average price of the last ten transactions before the close of the exchange on the day of assessment is taken. If fewer than ten transactions were made, the price of previous trades is taken into account.

For those assets that do not have sufficient liquidity, an independent assessment is carried out. Late payments, as well as debt of organizations that have been declared bankrupt, are not taken into account.

The main obligations of the investment fund consist of reserves for payment of services of a specialized depository, registry holder, auditor, independent appraiser and the investment company itself for asset management. In order to find out the size of such reserves on the date of determining the value of the share, a rule has been established according to which for open-end funds the number of days from the beginning of the year is taken, divided by 365 and multiplied by the cost of the services provided. For closed-end funds, the calculation is based on 1/12 of the cost of annual maintenance for each month that has passed since the beginning of the year.

The leaders in terms of NAV are the Uralsib Fund First fund (Uralsib Management Company) - more than 9 billion rubles, as well as the Dobrynya Nikitich and Ilya Muromets funds (Troika Dialog Management Company) - 6.4 billion and 5.6 billion respectively. Mixed investment fund "Small Business of Moscow" (Management Company "Aton Management") - 5 billion, open-end fund of shares "Petr Stolypin" (OFG Invest) - 4.8 billion rubles.

The procedure and terms for determining the value of the net assets of joint-stock investment funds and the net assets of mutual investment funds and the estimated value of an investment unit of a mutual investment fund are regulated by the “Regulations on the procedure and terms for determining the value of the net assets of joint-stock investment funds, the value of net assets of mutual investment funds and the estimated value of investment shares mutual investment fund”, approved by Resolution of the Federal Commission for Securities Market (now the Federal Financial Markets Service of Russia) dated October 22, 2003 No. 03-42/ps.

The net asset value of the net assets of a mutual investment fund is determined as the difference between the value of the assets of such a fund and the amount of obligations to be fulfilled at the expense of these assets.

The value of the assets of a mutual investment fund is determined as the sum of funds in accounts and deposits and the estimated value of other property that makes up these assets.

When determining the value of the assets of a mutual investment fund, accounts receivable arising as a result of transactions with these assets are also taken into account.

Receivables for interest (coupon) income on bank deposits and securities constituting the assets of a mutual investment fund are taken into account in calculating the value of assets in the amount calculated based on the interest (coupon) rate established in the bank deposit agreement or the decision to issue securities . Accrued interest (coupon) income on securities is not taken into account in calculating the value of the fund's assets if it is included in the estimated value of such securities, as well as if there is uncertainty about the actual receipt of this income, including in cases where the issuer of the securities meets the criteria bankruptcy or the issuer has overdue interest payments.

Declared but not received dividends on shares constituting the assets of a mutual investment fund, the payment of which was decided by the general meeting of shareholders of the joint-stock company, are not taken into account in calculating the value of the assets.

The assets of a mutual investment fund, as well as obligations to be fulfilled at the expense of these assets, expressed in foreign currency, are taken into account in calculating the value of net assets in rubles at the exchange rate of the Central Bank of the Russian Federation on the date of determining the value of net assets.

The value of the net assets of a mutual investment fund is determined as of the date of completion of the formation of the mutual investment fund, as well as:

in case of suspension of the issuance, exchange and redemption of investment units - on the day the decision is made to resume their issuance, exchange and redemption;

in case of termination of a mutual investment fund - on the date of occurrence of the grounds for its termination.

After completion of the formation of a mutual investment fund, the value of the net assets of such a fund is determined:

a) the value of the net assets of an open-end mutual investment fund - every business day;

b) net asset value of an interval mutual investment fund:

on the last day of the deadline for accepting applications for the acquisition, redemption and exchange of investment units of such a fund;

c) net asset value of a closed-end mutual investment fund:

monthly - on the last working day of each calendar month;

in case of redemption of investment units - on the day following the deadline for accepting applications for the acquisition of investment units;

in case of an increase in the number of investment units - on the day following the deadline for accepting applications for the acquisition of investment units.

The net asset value of a mutual fund is determined as of a point in time determined by the mutual fund management company.

The point in time for determining the value of the fund's net assets is indicated in the Explanatory Note.

When determining the value of net assets, changes in the assets of a mutual investment fund and obligations to be fulfilled at the expense of these assets that occurred during the period between the previous and current moments of determining the value of net assets are taken into account.

The results of determining the value of net assets, as well as the estimated value of an investment unit of a mutual investment fund, are reflected in the certificate of net asset value and appendices thereto, but are not reflected in the accounting and balance sheet of the fund.

In the event of a change in the point of time at which the value of net assets is determined, the certificate of the value of net assets shall indicate information about such a change and its reasons.

The average annual value of the net assets of a mutual investment fund is calculated as the arithmetic average of the value of the fund's net assets according to the data for each date of the calculation, determined based on the results of the calendar year.

When determining the estimated value of investment fund securities around the world, two pricing methods are commonly used:

forward – the estimated value of the investment fund’s securities is determined as of the moment following the end of accepting applications for the acquisition or redemption of investment fund securities;

historical – the estimated value of the investment fund’s securities is determined before the start of accepting investor applications for the purchase or redemption of these securities.

The peculiarity of the forward pricing method is that the investor submitting an application to purchase or redeem the fund’s securities does not know in advance the estimated value of these securities, and all applications received during the day are satisfied at a single estimated cost.

Under the historical pricing method, the investor submitting the bid knows in advance the estimated value and price of the investment fund's security. In this case, it is more convenient for the investor to make a decision on the purchase and sale of securities of an investment fund, since he knows exactly the price of the transaction. However, this pricing procedure puts an informed investor in an advantageous position, who has information about the structure of the investment fund’s portfolio and can accurately determine the change in the NAV value of the investment fund per day. This practice can create preconditions for information asymmetry of different categories of investors about the NAV, estimated value and prices of securities of investment funds.

Although the Federal Law “On Investment Funds” does not use the word “forward method”, Art. 26 of this federal law, it is permitted to use exclusively the specified method when determining the redemption and redemption prices of shares of Mutual Investment Funds. After completion of the formation of a Mutual Investment Fund, the amount of money (property value) contributed to the fund for which one investment share is issued (including upon exchange), and the amount of monetary compensation to be paid to the owner in connection with the redemption of the investment share (except for termination investment fund) must be determined based on the estimated value of the investment unit.

The estimated value of an investment unit of a mutual investment fund is determined on the date of determining the value of the net assets of such a fund by dividing this value by the number of investment units indicated in the register of owners of investment units of this mutual investment fund on the same date.

In the United States, the historical method of pricing mutual fund shares was allowed until the late 1960s. However, mutual funds are now required by the Investment Company Act of 1940 to issue and redeem mutual fund shares based on the NAV of the funds. In this case, the value of shares of mutual funds should be calculated only using the forward method at the time following the moment when applications for the acquisition and redemption of shares from investors cease to be accepted.

The Investment Funds Council Directive does not impose any restrictions on the use of different methods for pricing investment fund securities. In Art. 7 of this Directive provides that the depositary of an investment fund is obliged to ensure that the value of the shares is calculated in accordance with the law and the rules of the funds. Despite the predominance of the forward method, in various European countries (for example, Great Britain) there are still investment funds that use the historical method of pricing the securities they issue.

The experience of the functioning of foreign investment fund securities markets shows that their pricing mechanism does not provide complete protection for inexperienced investors from manipulation by sophisticated players. One of the methods of manipulation is called “late trading” and means providing an exclusive opportunity to a number of persons to submit applications for the acquisition or redemption of securities of an open-ended investment fund after the moment the prices for the issue and redemption of the fund’s securities are determined, for which these applications are satisfied. Exclusive possession of information about the prices for the issue and placement of securities of an investment fund at the time of filing an application and changes in the NAV of the investment fund after the completion of exchange trading in the securities that make up the portfolio of this fund, before the opening of the next trading day, allows a narrow group of investors to extract additional profit from transactions with securities investment fund, eroding the value of the investments of unsophisticated investors.

In Russia, the composition and timeliness of information disclosed by mutual fund management companies do not yet allow for calculations that can be used to identify signs of late trading in investment funds. Most Mutual Funds do not publish information on a daily basis regarding cash flows resulting from the issuance, exchange and redemption of Mutual Fund investment units. The high volatility of prices of financial instruments in Russia and the lack of rules aimed at preventing late trading create increased risks of using this practice.

The Federal Law “On Investment Funds” and the regulatory legal acts of the Federal Financial Markets Service of Russia do not yet contain rules that prevent late trading. In accordance with the Regulations on the procedure and terms for determining the value of the net assets of joint-stock investment funds, the value of the net assets of mutual investment funds, the estimated value of investment shares of mutual funds, as well as the value of the net assets of joint-stock investment funds per share, approved by order of the Federal Financial Markets Service of Russia dated June 15, 2005 No. 05-21/pz-n, the moment at which the NAV of the Mutual Investment Fund and the estimated value of its investment shares are determined is determined by the management company of the Mutual Investment Fund independently in the internal documents of the management company of this fund. At the same time, the specified moment of NAV calculation is not fixed in the rules of trust management of the Mutual Investment Fund, i.e. in a document available to all interested investors.

To better understand the principle of operation of mutual funds - Mutual Investment Funds - you need to consider what the assets are and who ensures the operation of the fund.

Mutual Fund assets

A mutual fund is considered a property complex, and not a legal entity, and cannot perform any actions on its own (for example, participate in trading on the stock exchange). A mutual fund is investors' funds, a set of assets. These include:

• securities of various enterprises, including banks;
• money in accounts;
• cash reserves (which are necessary for current payments to investors upon redemption of shares).

Securities and funds in accounts make up the fund's investment portfolio. And by purchasing one share, an investor acquires a certain share of all securities that make up the mutual fund’s portfolio.

Participants in the mutual fund activities

The following participants are involved in the work:

Investors (or in other words shareholders)– private individuals, having purchased fund shares, they own the fund’s assets.

Management company (MC)– manages the fund’s assets. The management company is obliged to provide timely information about the fund to its investors and government regulatory authorities.

Specialized depository– saves mutual fund assets. The depositary also calculates the value of the fund’s net assets and the cost of one share.

Specialized Registrar– registers and maintains records of shareholders and fund units.

Auditor– conducts regular audits of the fund’s activities.

Agent– works with potential private investors – provides information, accepts applications, and provides them with extracts and notifications from the register of mutual fund shareholders.

Service agreements with the special depository, special registrar and auditor, as well as the agency agreement with the agent, are signed by the management company. From the funds of the fund, the management company pays all of the above participants for services rendered.

All mutual fund participants, except investors, are legal entities and their activities must be licensed by the Federal Service for Financial Markets.

Principle of operation

A simple diagram will help you understand the principle of how work is distributed among mutual fund participants.

The procedure is as follows:

1. The investor submits an application for the purchase (sale) of shares directly to the management company or to a representative or agent of the fund. Then, upon purchase, he transfers the money to the mutual fund account. (The management company has separate bank personal accounts for operations related to fund management).

2. The management company sends the documents to the registrar, who assigns shares to the investor in the register of fund owners.

3. The registrar sends the investor a notification statement about his purchase/sale of shares.

4. The management company instructs the broker what type of securities to purchase on the exchange and transfers money for their purchase.

5. Purchased securities are transferred to the fund's account in a special depository for storage.

6. The depositary credits securities to the mutual fund account.

It is also worth noting that the depository, registrar, and management company work together and during the course of their activities they mutually verify certain functions of each other (for example, accounting and calculating the value of the share). It is this control scheme that gives mutual funds additional reliability in the safety of investors’ investments. And auditors monitor all activities of the mutual fund and its participants.

How is the share price calculated?

The share is considered a registered security, but it is not issued in person. The accounting of shares is carried out by the registrar in special accounts in the register of investors of the mutual fund. An open-end fund has no restrictions on the number of shares. The management company will sell as many shares as the funds contributed by investors.

The estimated value of a share is one of the most important indicators of a mutual fund. At this price, the management company sells and redeems the shares. The income of shareholders depends on changes in the price of shares.

NAV – Net Asset Value of the fund – is the second significant indicator, the value of the fund’s property in monetary terms, its investment portfolio. These are securities purchased by the fund and cash, as well as the difference between receivables and payables in the fund's account.

After determining the net assets of the fund, the value of the share is calculated - it is equal to the ratio of the NAV to the number of fund shares:

Estimated Share Value = Net Asset Value / Number of Shares

The value of a mutual fund's assets changes under the influence of two factors: if shareholders deposit or withdraw funds from the fund, and also if there are changes in the market value of the securities of the fund's investment portfolio on the stock exchange.

But the value of the share changes only when the value of the mutual fund’s investment portfolio changes on the market (on the stock exchange).

Where can I find information about the activities of mutual funds?

You can get more information about management companies, the profitability of mutual funds and other indicators of their activities on specialized websites:

• www.investfunds.ru – presents mutual fund ratings and financial market news

• www.nlu.ru – the site represents the National League of Managers

• www.fcsm.ru – on the website of the Bank of Russia Service for Financial Markets you can find a register of registered mutual funds and management companies

• www.prodengi.ru – website of a specialized depository, provides up-to-date information showing the profitability of mutual funds

How do you receive income from a mutual fund?

The income of a mutual fund investor is obtained only when the value of his shares increases. The price of a unit is subject to market fluctuations and may increase, decrease and then increase again. Mutual fund investors are not insured against the risk of losses associated with its change. No one guarantees the fund's profitability.

Investors of interval and open mutual funds do not receive any income such as dividends or interest from holding shares. The shareholder has a profit provided that the price of the shares increased only when the shares were redeemed or sold by the management company (or on the secondary market, on the stock exchange).

The investor does not purchase a certain number of shares, but invests any amount above the minimum threshold into the fund. As a rule, for private investors this threshold does not exceed several thousand rubles.

Then the registrar credits the shareholder’s account with a certain number of shares. It is calculated by dividing the amount contributed by the investor by the estimated value of one share on the day the information is added to the register. Please note that in this case the amount is reduced by the amount of the surcharge. The number of shares owned by one investor may be fractional.

How many shares are in one mutual fund?

The answer to this question depends on the type of fund. The number of units in an interval and open-ended fund is not limited. That is, the management company can issue as many shares as the shareholders contribute during the entire life of the fund. The number of units in a closed-end fund is limited.

We've come to the most important part of this lesson - indicators of investment attractiveness of mutual funds. Each fund has two such indicators: the value of the fund’s net assets and the estimated value of the share.

Net asset value (NAV) of the fund- the total value of all fund property (securities, cash, deposits, accounts receivable, etc.), from which the fund’s accounts payable and reserves for future expenses and payments are subtracted. NAV is the main characteristic of the fund's size.

Estimated value of the share- the price at which the management company issues and redeems shares. It is on this indicator that the shareholder’s income depends. The estimated value is determined based on the net asset value. To calculate it, the NAV of the fund is divided by the number of shares issued at the moment.

Estimated share value = NAV / Number of shares

These calculations are simultaneously carried out by both the management company and the specialized depository, because, as we remember, the depository controls the management company. After this, the information can be disclosed to all interested parties. For an open mutual fund, this information is published daily, while for an interval mutual fund - once a month.

Example: this is what the financial indicators of the Sberbank-Electroenergetics mutual fund look like in 2015-2017.

How to use these indicators?

NAV changes under the influence of two factors: changes in the market value of assets in the fund’s portfolio and the inflow/outflow of funds from shareholders into the fund. The estimated value of the share depends only on changes in the market value of the assets. If you compare the dynamics of both indicators, you can find out whether investors are investing or withdrawing money from the fund. That is, how attractive a given fund is from a market point of view.

If the growth in NAV over a certain period of time is equal to the growth in the value of the share, the value of the fund's assets changes only because of the growth of the stock market. If the growth in NAV exceeds the growth in the estimated value of the share, we can speak of a net influx of capital into the fund - a good sign for investors.

A mutual fund is simply the funds of all shareholders added together, with which the management company purchases securities or other assets permitted for mutual funds by Russian law. The owners of all mutual fund property are the shareholders. The management company only carries out trust management exclusively in the interests of shareholders and only within the framework of the law “On Investment Funds” and the regulations of the state regulatory body (Federal Service for Financial Markets, abbreviated as FFMS of Russia).

Moreover, the mutual fund itself is not a legal entity. A mutual fund is called a property complex. In order to protect the funds of shareholders, funds are managed and stored by different companies. The fact is that all securities are accounted for in a special organization - a specialized depository, which not only stores securities, but also controls all operations with the funds of the mutual fund. Any order on the purchase or sale of securities or other expenditure of funds from a mutual fund must be signed not only by the head of the management company, but also by a responsible employee of the special depository.

Companies are jointly and severally liable, and they will answer with their property for any violation of the rules of the mutual fund. If the management company wants to carry out transactions that do not comply with the fund’s investment declaration, the specialized depository will not give consent to them and will block the transaction.

A specialized depository does not have the right to use and dispose of the property of a mutual fund; its task is to keep records of this property and control the actions of the management company. It is important to note that the specialized depository determines the value of the fund’s net assets, the estimated value of the unit and the number of units issued, thereby controlling the management company.

The rights of shareholders to a share of property in a mutual fund are taken into account in a register maintained by a special company - a specialized registrar (legislation allows a specialized depository to perform this function). The register records all information about the owners of investment units and the number of units they own, information about the total number of issued and redeemed investment units. The register also maintains records of the purchase, exchange, transfer or redemption of units by the owner. As you can see, this important function of maintaining the register of shareholders is performed not by the management company itself, but by another organization - a specialized registrar. The correctness of accounting and reporting of the management company is checked by the auditor.

Thus, not one, but four organizations participate in the work of the mutual fund, which guarantees the reliability of the mutual fund. Management companies, special depositories and special registrars are licensed by the Federal Financial Markets Service of Russia, and auditors are licensed by the Ministry of Finance. Each of these organizations has strict requirements.

The principle of separating the management of shareholders’ funds from their storage is a unique mechanism that allows for high security for investors. It is thanks to this principle and strict control by the state that during the entire period of operation of Russian mutual funds there has not been a single case of deception of shareholders, not a single scandal. Truly this is a unique situation for Russia! However, there is a first time for everything, and the first bells already rang when, due to problems of the founders, two management companies were unable to continue their work. We are talking about the companies “Top Capital” and “Oil and Gas Assets”. These cases confirm that the younger the companies, the more dependent they are on funding from founders and the greater their risks.

For settlements on transactions related to the trust management of a mutual investment fund, the management company has separate bank accounts. Shareholders transfer funds for purchased shares to these accounts. The interaction scheme between the parties involved in the work of the fund is as follows:

1. The investor submits an application for the acquisition of investment units to the management company or through the fund’s agent for the acquisition and redemption of units and transfers the money to the fund’s account.

2. The management company sends documents to a specialized registrar, where a register of shareholders is maintained, for crediting shares to the investor.

3. The registrar sends the investor a notice of the acquisition of shares.

4. The management company gives an order to the broker to purchase securities and transfers money. Brokers purchase securities on the stock exchange.

5. The purchased securities are transferred to the fund's account in the depository, where the securities are recorded and stored. 6. The depositary credits the securities to the fund account.

What is a share

When depositing money into the fund, the investor becomes the owner of the share. But the shares are not issued in person - now almost all securities exist in book-entry form, and the rights to investment shares are recorded on personal accounts in the register of investment share owners. The register of fund shareholders, as you already know, is maintained by a specialized registrar or a specialized depository. They record the number of shares of each shareholder and issue shareholders with extracts from the register as confirmation of their ownership rights to the shares.

As stated in the Federal Law “On Investment Funds”, an investment share is a registered security certifying its owner’s share in the ownership of the property that makes up the mutual investment fund. The share gives the right to demand from the management company proper fiduciary management of the mutual investment fund and the right to receive monetary compensation upon termination of the fund's activities.

The investment share also gives the owner the right to demand from the management company the redemption of the investment share and payment of monetary compensation in connection with this.

The owner of investment units can dispose of investment units in the same way as any other security. They can be sold, donated, bequeathed, inherited, left as collateral, etc.

An investment unit has no nominal value, and the number of investment units belonging to one owner can be expressed as a fraction. When an investor becomes a shareholder in a fund, he does not buy a whole number of shares, but simply contributes to the fund any amount of funds not lower than the minimum amount determined by the management company for each fund. A certain number of shares is recorded in the shareholder's account, which is determined by dividing the amount of funds contributed by the shareholder by the estimated value of the share on the day the entry is made in the register (the amount is reduced by the amount of the premium). For example, on a personal account it may be recorded that the shareholder owns 325.23456 shares.

The number of units in open-ended and interval funds is not limited. The management company will issue as many shares as the funds contributed by shareholders throughout the entire life of the fund. In a closed-end fund, the number of shares is limited by the management company for the entire period of its operation.

There are two important indicators for each fund. The first indicator is the estimated value of the share. Based on the estimated value of the share, the management company issues and redeems shares. The shareholder's income depends on changes in the estimated value of the share. The second indicator is the net asset value (NAV) of the fund. NAV characterizes the size of the fund. Net asset value is determined as follows. The value of all fund property (securities, deposits, cash, accounts receivable) is summed up and accounts payable and reserves for future expenses and payments are subtracted.

Based on the value of the fund's net assets, the estimated value of the share is determined. To do this, the NAV of the fund is divided by the total number of issued shares:

Estimated share value = NAV / Number of shares

The calculation of the net asset value and the value of the share is carried out simultaneously by both the management company and the specialized depository of the mutual fund. This is a necessary condition for the accuracy of the calculation, thus the depository controls the management company. After confirmation by a specialized depository of the net asset value and the estimated value of the share, the management company discloses this information to all interested parties.

It is important to note that the estimated value of a share of an open-end mutual investment fund is determined and published by the management company daily. The estimated value of a unit of an interval mutual investment fund is determined by the management company on a monthly basis, as well as on the last day of each interval for accepting applications from shareholders to carry out transactions with shares.

The value of a fund's assets changes based on two factors: how shareholders deposit and withdraw money from the fund and how the market value of securities in the fund's portfolio changes. And the estimated value of the share depends only on one of these factors – changes in the market value of securities in the fund’s portfolio. Management companies disclose information about the net asset value of funds. A graph or table of changes in the value of the fund’s net assets can be found on the company’s website or requested at the application office. But in this form, these data do not provide an idea of ​​why the NAV of the fund is changing - either the securities in the fund’s portfolio are growing (falling), or shareholders are actively buying (selling) shares.

If you compare the growth of two indicators - the estimated value of the share and the net asset value for any period of time, you can find out whether shareholders are investing money or withdrawing it from the fund. Thus, the NAV dynamics are cleared of the influence of changes in market prices of securities.

If the increase in NAV is equal to the increase in the value of the share for the selected period of time, it means that the value of the fund’s assets changes only due to changes in the price of securities and there is no general trend in the purchase or sale of shares. Shareholders do not join the fund and do not leave it. If the increase in NAV is greater than the increase in the value of the share, it means that the balance of sales of shares is positive - shareholders buy more shares than they sell. This does not in any way affect the results of fund management by the management company and does not in any way affect other shareholders (especially if the fund is large and has many small shareholders). But these data give us an idea of ​​how other shareholders assess the attractiveness of this fund and the current situation on the securities market, as well as how actively the management company attracts shareholders.

How does a shareholder receive income?

The shareholder's income consists of the increase in the value of his shares. The value of shares may either increase or decrease over time as the market value of the securities included in the fund's assets changes. That is why holders of investment units bear the risk of losses associated with changes in the value of the units. The fund's profitability is not guaranteed either by the state or the management company. The management company also does not have the right to provide any guarantees, promises or even make assumptions about the future efficiency and profitability of its investment activities.

Owners of shares of open-ended and interval mutual funds are not accrued or paid any income in the form of interest or dividends. The shareholder receives income only when the shares are redeemed by the management company or when the shares are sold on the secondary market (of course, if the value of the shares has increased and covered all the shareholder’s expenses). In closed mutual funds, periodic payments can be established, a kind of analogue of dividends.

Purchase and sale of shares

After submitting an application and receiving money into the fund’s account, the investor opens an account in the register of shareholders, where the shares purchased by him are credited. The register of shareholders is a system of records that keeps records of who owns and how many shares.

Confirmation of the purchase of shares is an extract from the register. When redeeming shares, the shareholder submits an application for redemption of shares to the management company or any agent of the fund. An entry is made in the register of shareholders that the shares have been redeemed, and the shareholder is transferred money to his bank account. The shareholder is also given an extract from the register.

We have now looked at the purchase and sale of shares in the primary market. Mutual fund units are securities and have free circulation on the market. They, like any security (stocks, bonds), can also be bought or sold on the secondary market, either from a friend or through a broker. Imagine that in your city there are no management companies or agents for buying and selling shares. Or you need to sell shares of an interval fund without waiting for the interval opening period. In both cases, secondary circulation of shares will help you.

Secondary circulation of shares differs from primary circulation in that transactions with shares are carried out not through the management company, but with other owners of shares, for example, through brokerage companies. The mutual fund management company does not participate in these operations. Transactions with units in the secondary market can be made both on the exchange and off the exchange.

Buying and selling shares on the stock exchange

In 2003, secondary exchange trading of shares of some mutual investment funds began on the RTS Stock Exchange and the Moscow Interbank Currency Exchange. This means that mutual fund shares are among those securities that are bought and sold on the stock exchange. Exchange trading of shares allows investors to buy shares of investment funds regardless of their territorial location. The organization of exchange circulation of shares also creates additional opportunities for investors who invest in interval funds, since shares can be bought and sold on the exchange at any time, and not only during the opening period of the interval established by the management company. Thus, investors can exit these funds at any time, locking in profits.

Exchange trading is even more important for closed-end mutual funds. The organization of secondary circulation allows investors to sell shares of closed-end real estate funds without waiting for the end of the fund's life. It becomes easier to buy shares. If the minimum amounts for the formation of real estate funds are millions of rubles, then on the stock exchange private investors will be able to buy shares for significantly smaller amounts.

Shares of 10 funds are traded on the RTS exchange under the management of 4 management companies: Interfin CAPITAL, OLMA-FINANCE, Otkritie, Troika Dialog. Shares of almost 80 funds under the management of 39 management companies are traded on the MICEX exchange. The circulation of investment units on exchanges is organized according to the same scheme as trading in shares and corporate bonds. To purchase shares on the stock exchange, you need to contact a broker who has access to these trading platforms, enter into an agreement for brokerage services, open an account with the broker and deposit money into the account. You can make transactions with shares via the Internet and the trading system, as well as by giving instructions to the broker directly or by phone.

Exchange trading of shares is just beginning to develop. Transactions with shares on the stock exchange are still quite rare. The main problem with exchange trading of shares is the small number of sellers and buyers who are ready to make such transactions. The exchange market for shares is illiquid. This means that there are few offers for the purchase and sale of shares at the auction, the difference between the offer and demand prices can be several percent, and the price of transactions differs unfavorably from the price calculated by the management company. All this makes exchange trading of shares unattractive for investors. As the liquidity of the exchange market increases, transactions with shares on the exchange will have their advantages over the purchase and sale of shares through a management company.

With the traditional sale of shares on the primary market, you need to submit an application to the management company, in about a day an entry will be made in the register, then it will take a few more days (up to two weeks) to transfer the money to the shareholder’s account. In the case of an interval fund, this process is extended over an even longer period.

When making a transaction on the stock exchange through an online broker, the operation will take a few seconds, and the money from the sale of shares will immediately go to your account with the broker. And the money will be transferred to your bank account by the broker in a matter of days. Although mutual funds are a long-term instrument, it never hurts to be proactive, especially if force majeure events occur in the stock market, such as a drop in the stock market as a result of negative political news. Exchange trading allows you to provide this operational advantage.

Purchase and sale of shares on the secondary over-the-counter market

Buying and selling shares of interval funds only during the opening period of the interval is not very convenient. Many investors would like to trade interval fund shares on any given day. To do this, some management companies (for example, Uralsib, KIT Finance) organize secondary circulation of shares outside the stock exchange through an investment company or bank. This company (bank) sells and buys back shares from shareholders on any working day. During the opening period of the interval, the company (bank) buys and redeems shares in the management company. But the mutual fund management company itself does not participate in operations on the secondary market. The owner of the shares is another company (bank). To complete the transaction, the investor and this owner enter into a purchase and sale agreement.

Price of shares on the secondary

The market is formed as follows: every day the company (bank), which acts as the owner of the shares, sets its price for the share. This price may differ from the estimated value of the share determined by the management company by 1–2%.

When purchasing units on the secondary market, it is important to understand how ownership of the units is transferred and which custodian maintains ownership records for them. Two secondary circulation schemes are used. In the first case, when purchasing shares on the secondary market from the owner company, the shareholder opens a personal account in the register of fund shareholders. The selling company, on the basis of a share purchase and sale agreement, instructs the organization maintaining the register to transfer the shares to the account of the new owner. The same thing happens when selling shares on the secondary market, only now the order to transfer the shares to the new owner’s account in the register is given by the shareholder.

In the second case, the shareholder’s ownership of the shares is registered in the register of owners of investment shares on the personal account of the nominal holder. Another depositary acts as such a nominal holder. The nominee holder of securities is registered in the registry system. He is a depositor (i.e. shares are registered with him), but he is not the owner of these securities. The nominal holder himself keeps track of which of the shareholders owns how many shares. Only professional participants in the securities market - depositories - can be a nominal holder.

Units purchased on the secondary market can be redeemed at the management company during the opening period of the interval. To do this, the shareholder must submit an order to redeem the shares to the depositary - the nominal holder. The depositary, as a nominee holder, submits applications indicating the name of the owner of the investment units to the management company of the mutual investment fund, which carries out the redemption of the investment fund units. Money from the redemption of units is transferred to the account of the unit owner specified in the application for redemption.

Shareholder expenses

When investing in mutual funds, the shareholder incurs certain expenses. They can be divided into two groups: expenses that an investor incurs when purchasing and redeeming shares, and expenses that are reflected daily in the value of shares.

Let's look at the first group of expenses, since they are the most obvious. When purchasing shares, the shareholder immediately bears costs in the form of a so-called premium to the cost of the share. This means that shares are sold to you more expensive by the amount of the premium. You contributed 10,000 rubles to the mutual fund, the premium to the value of the share is 1%, in total you will only have shares in the amount of 9,900 rubles in your account. The surcharge is charged to reimburse expenses associated with the issuance of shares. When submitting an application to purchase shares to a management company, the premium goes to the management company; when purchasing shares through an agent, the premium remains with the agent.

The maximum amount of the premium cannot be more than 1.5% of the estimated value of the investment share. In this case, the size of the premium, as a rule, varies depending on the amount contributed to the fund - the larger the amount, the lower the percentage of the premium. There are funds in which no premium is charged, for example, you deposited 30,000 rubles, and in your account you will have shares worth 30,000 rubles.

Similarly, when redeeming units, a discount is applied to the estimated value of the units. This means that you sell the shares for less than their current estimated value by the discount amount. For example, when selling 100 shares at an estimated cost of 500 rubles. and a 2% discount, the investor would receive an amount of 49,000 rubles. (excluding taxes).

The discount is charged to reimburse the costs of the management company or agent associated with the redemption of shares. The maximum discount cannot be more than 3% of the estimated value of the share. Typically, the discount is smaller the longer your money has been in the fund. After just six months, the size of the discount, as a rule, is significantly reduced. This is one of the reasons to invest in mutual funds for longer periods, at least six months or a year. This is how management companies regulate the investment period by the amount of the discount. Keep in mind that it is the period of ownership of the shares that will be taken into account. If you made several different purchases at different times, then for each portion of shares the holding period is calculated separately. When redeeming units, no further costs other than the discount (and taxes) will be charged.

The investment period is calculated not only from the date of purchase of shares, but also from the date of exchange of shares of one fund for shares of another mutual fund of the management company. When exchanging shares, the investment period is reset to zero, and the discount will be calculated based on the holding period of the shares of the last fund.

When exchanging units, no surcharges or discounts are charged. Allowances and discounts may vary between agents and management company. As a rule, agents have them a little higher. Premiums and discounts are determined by the management company; they are described in the rules of trust management of the mutual fund, including for each agent.

So, when buying shares you lose due to a premium (up to 1.5% of the amount), when selling shares you lose at a discount (up to 3%). Every day, shareholders lose part of the value of the share and other expenses that are collected by the management company from the fund’s property (i.e. at the expense of the shareholders). This is the cost of managing a mutual fund. They include remuneration for the management company, specialized depository, specialized registrar, appraiser and auditor. For reference: the amount of these expenses, according to the law, cannot exceed 10% of the average annual value of the fund’s net assets. In practice, competition forces managers to reduce management costs, so the average company fee for managing a mutual fund is about 3%, or more precisely, 2.72%. Bond fund management costs are lower, averaging 1.78% for open-end bond funds. Managers' remuneration for managing equity funds is higher. For open equity funds it is 3.24%, for interval equity funds – 3.36%. Sometimes management companies determine their commission only based on the growth of the fund's assets. No growth – the management company receives no income. This method of calculating remuneration makes a company's income directly dependent on its success, and we are confident that competition will force more and more companies to use this particular option for calculating their remuneration.

VAT is charged on expenses. Typically, the rules of the funds indicate expenses already including VAT. But some companies indicate the amount of expenses without VAT. In this case, it is necessary to make an appropriate adjustment when comparing several different management companies in terms of the size of their costs for managing the fund.

It is important that all these costs are already included in the estimated value of the share, which is published by the management company. This means that they will not reduce the estimated value of the share and the investor's return on investment. In fact, the shareholder does not even need to know how much money is spent on managing the fund. The shareholder knows the final result of management - the estimated value of the share and will redeem the shares at this value.

There is no need to necessarily compare funds based on the management company's remuneration - the fund with the highest expenses can also bring greater profitability to the shareholder due to the growth of shares. But this characteristic should not be neglected either. As you know, past income is not guaranteed in the future, but it is inevitable that a larger amount of remuneration will definitely “eat up” a large part of the income.

The final results of the shareholder’s investment will be influenced by the increase in the estimated value of the share during the investment period, taking into account the withheld premiums and discounts.

Other possible costs are only associated with transferring money into the mutual fund bank account and will be charged by your bank. But even on these expenses you can save if you deposit money into the fund through the bank where the account of this mutual fund is opened.