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TRANSACTION COSTS
Transaction costs are incurred by our funds when investments are bought and sold. These can include transition manager fees, broker fees and commissions charged for carrying out the trade, taxes incurred when buying and selling different types of investments, and other costs. They are paid from the value of the fund and this is a normal part of the ongoing management of most of our funds. These costs are not included in the ongoing charge that appears on the Key Investor Information Document (KIID), but represent a reduction in the fund’s investment return.
Changes to assets within our actively-managed funds to reflect the new Investment Adviser’s views of assets in the funds, economic forecasts and the market, will result in a short-term increase in these transaction costs.
For some of the funds a specialist transition manager will be used to manage the transition process cost-effectively over a short period. Efficient management of this process is an important part of a strong governance structure to protect asset values.
The transaction costs to the funds during the transition period will be capped, based on our estimate of what these might be, and monitored by us in order to limit their impact on short-term performance. The cap will vary dependent on the fund and is set at a level we consider to be appropriate, determined by our expectation of future performance (considering market volatility), up to a maximum of 0.75%.
Any amount above a transaction cost cap will be offset by a payment by Lloyds Banking Group into the fund.
We believe the changes made by the new Investment Advisers will benefit your investment over the longer term. However, as part of our usual robust governance process, we’ll continually monitor their performance against benchmark and other targets.