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Corona crisis - steps taken to protect funds and investors in Danske Invest SICAV-SIF

The corona crisis has affected all financial markets in recent weeks. In the interests of our funds and investors, certain funds have been suspended and the use of swing factors has been expanded.

The ongoing corona crisis has led to increased market volatility and rising transaction costs when underlying securities are bought or sold due to investors redeeming or subscribing to a fund. In the interests of the fund and its unit holders, we have decided to expand the use of swing pricing. 

Funds falling within the scope of swing pricing in SICAV SIF are currently Global Cross Asset Volatility and Fixed Income Global Value.

You can find the relevant notice to shareholders and information about the use of swing factors under: “Publications, investor notices and other documents”

What is swing pricing?
Swing pricing is a tool we use to provide reasonable protection to existing shareholders in a fund. When many investors sell their holdings or simultaneously buy into a fund, the portfolio manager has to sell out of, or buy into, the underlying investments. This entails some additional trading costs, such as commissions paid or implicit costs, including the difference or ‘spread’ between buying and selling prices. 

Under normal circumstances, the costs of buying and selling underlying securities are absorbed by the fund and thus covered by all the remaining investors. Assuming these costs are small and that investors have similar trading patterns, this is not a big issue. However, when trading costs increase and many investors either sell or buy at the same time, trading costs can become significant and erode the value of the fund. If this happens, the remaining investors have to “foot the bill” for those who sell/buy. Swing pricing is intended to ensure that long-term investors in the fund who do not buy or sell their units are not affected by the transaction costs incurred by other investors buying or selling.

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