transaction spread
Buy/sell spread
A fixed percentage applied at the point of order to cover the transaction costs of investing inflows or liquidating to meet outflows. Charged once, not annually.
A buy/sell spread is a fixed percentage added to the unit price when an investor buys, and subtracted when an investor sells. The spread funds the underlying transaction costs — broker commissions, bid-ask spreads on securities, and any market-impact slippage — incurred when the fund deploys new money or liquidates to meet redemptions.
A buy/sell spread is a one-off cost per transaction, not an annual fee. It is paid into the fund itself, not to the manager, so existing unit holders are insulated from dilution caused by other investors' flows. The spread is disclosed in the PDS and in the Quarterly Fund Update for each fund.
Typical NZ ranges sit between 0% and 0.50% per side, with higher figures on funds holding less-liquid asset classes (NZ small-caps, NZ direct property, offshore corporate credit). Index ETFs trading on NZX show the equivalent friction as a bid-ask spread on market.
Related terms
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swing-pricing
Swing pricing
A unit-pricing mechanism where the fund's unit price is adjusted up on net inflow days and down on net outflow days to pass transaction costs onto entering/exiting investors rather than the existing pool.
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NAV · Net asset value
Unit price (NAV)
The price of one unit in a managed fund — the fund's net asset value divided by the number of units on issue. The unit price is what you transact at when buying or selling.
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AFC · Total fund charge · MER
Annual fund charge
The total ongoing percentage charge paid out of a NZ managed fund each year — covering management fees, supervisor/custodian fees, audit, and other operating costs.
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PDS
Product Disclosure Statement (PDS)
The headline legal document a NZ managed fund or KiwiSaver scheme provides to retail investors, summarising the fund, fees, risks, and how to invest.