1. Why have so many funds been suspended lately?
The key reason is the market turmoil caused by the corona crisis. When it is not possible to price the underlying securities in a fund, it is not possible to promptly and accurately ascertain the fund’s net asset value (NAV). Without an accurate NAV, investors cannot subscribe/buy or redeem/sell at correct values. Therefore, suspending is considered to be in the best interest of the fund and the fund’s investors.
2. What is a suspension?
A suspension is used to protect investors in the fund. Suspending trading in a fund means in practice that no one can either subscribe/buy or redeem/sell the fund. The suspension protects investors from trading at prices that are not accurate. This is important for investors who want to buy or sell their units in the fund, but it is also important for existing investors who stay in the fund that other investors enter and leave the fund at accurately ascertained prices. Without a suspension, we might risk that we transfer value from/to the investors who trade in the fund vs. existing investors remaining in the fund.
3. Why is a fund suspended?
A suspension is always done in the interest of the funds and the investors. An important task we have is being always able to calculate a fair NAV for all our funds. However, certain events can arise that force us to enact a suspension. This might be due to entire markets closing or the introduction of a halt to trading – or as now, when liquidity in the underlying securities is poor and prices are so volatile that we simply cannot promptly and accurately ascertain the NAV of the fund.
4. What is NAV?
The NAV is the value of one unit in the fund. In simple terms, it is the net asset value of the fund at a given point in time divided by the number of units held by investors in the fund.
5. Who decide to suspend a fund?
The decision to suspend a fund is always made by the management company in charge of the fund or the fund board. The decision is made based on market conditions, input from portfolio managers / advisors and other relevant information, but the final decision is a judgement reflecting each specific situation. Local authorities have to be informed both in the domicile country of the funds and in the countries where the funds are registered for marketing. In some countries, the authorities have to approve a suspension.
6. What do suspensions mean to me as an investor?
In practice, when a fund is suspended it means that units in the fund cannot be sold or bought as long as the suspension is in effect. We fully understand the frustration of not being able to trade your investments – but in periods like the present a suspension can be necessary to protect investors, both new investors who want to trade and the existing investors in the fund.
7. Where can I see which funds are suspended?
On Danske Invest’s website you can keep track of which funds are suspended and when the suspension ends:
”Publications, investor notices & other documents”
8. How do I get information about suspensions?
Danske Invest has hundreds of funds and share classes marketed in various jurisdictions and supervised by different FSAs.
Danske Invest tries to notify advisors and investors as soon as possible about relevant suspended funds. In order to treat investors equally, we first inform them about suspensions via the websites in the countries where we distribute.
9. Why are some fixed income funds, e.g. High Yield, suspended more frequently than others?
In times of very high uncertainty, some fixed income assets, e.g. high yield, become more difficult to price due to liquidity constraints in the marketplace. This reflects the nature of the asset class (credit quality, size and volume of the market, etc.) and is in line with our experience from other situations with stressed markets.
10. If I have placed an order through my bank, will it then be cancelled or executed later?
We distribute funds through Danske Bank and other distributors. Distributors may have different ways of handling this situation and we recommend that clients ask the distributor.
11. Can one share class of a sub-fund be closed and another be open?
No, not at the same time.
12. Can we describe exactly when a fund will be suspended?
As mentioned in question 5, a decision to suspend a fund is always based on facts, but the final decision is a judgement call reflecting the specific situation. Hence, it is not possible to exactly describe all the potential situations that could lead to a suspension.
Danske Invest has prepared this material for information purposes only. It does not constitute investment advice. Always consult with a professional advisor if you are considering making an investment based on this material to ascertain if a particular investment suits your investment profile, including your risk appetite, investment horizon and ability to absorb a loss.
1. Why have so many funds been suspended lately?
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