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.
Swing pricing adjusts the daily unit price of a managed fund by a small percentage in the direction of net flows. On a heavy net-inflow day the unit price is "swung up" so entering investors pay a slightly higher price; on a heavy net-outflow day the price is swung down so exiting investors receive slightly less. The swing covers the transaction costs (brokerage, market-impact slippage) of investing or liquidating to meet flows.
Without swing pricing, transaction costs caused by inflows and outflows are absorbed by all existing unit holders, including those who did not transact that day — diluting their returns. Swing pricing is one of several mechanisms NZ retail managed funds use to manage flow-driven dilution; alternatives include explicit buy/sell spreads and entry/exit fees.
NZ retail PIE funds that use swing pricing disclose the swing thresholds and maximum swing factor in the PDS or OMI. The mechanism is more common in offshore equity and fixed-interest mandates where underlying transaction costs are material.
Related terms
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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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OMI
Other Material Information (OMI)
A supplementary FMA-required disclosure document containing material information about a fund or scheme — typically conflicts of interest, related-party transactions, fee waivers, auditor/trustee/custodian identities — that is not included in the PDS.
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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.