Fund confusion

By MARY HOLM

Q: Being a first-time investor and an avid reader of your column, I have decided to try dipping my foot into AMP Investments' World Index Fund.

However, I found that it's traded on the NZ Stock Exchange at about $1.61 for one share, while its exit price through the fund manager is at about $1.07 per unit.

What's making this difference in price? Is one share on the share market different to one unit of managed fund?

Also, if I buy them through the stock market, would I be able to redeem them from the fund's manager?

You're looking at two different unit trusts, but your confusion is understandable.

AMP Henderson's World Index Fund, or WiNZ, is listed on the NZ Stock Exchange and has been trading at around $1.61.

AMP's International Passive Fund, which invests into WiNZ, is not listed. It's been trading at around $1.07.

The difference in the pricing reflects the way the funds were set up, but it doesn't matter to investors.

If you invested the same amount into each fund, you would simply get more Passive Fund units, but each one would be worth less.

When you took your money out again, you would get much the same from each fund.

As AMP Henderson's Simon Urquhart-Hay puts it: "Any rises or falls in the [WiNZ] fund will be reflected virtually identically in the two funds."

So why have two funds?

The International Passive Fund "is one of a range of personal superannuation and unit trust funds available through AMP's Savings and Investment Portfolio (SIP)", says Urquhart-Hay.

It targets "investors who may not be comfortable investing in listed securities. It also means the SIP investors can have their WiNZ exposure, via the AMP International Passive Fund, reported on alongside their other unit trusts."

You buy into WiNZ through a sharebroker, and into the Passive Fund through an AMP adviser.

This means upfront and ongoing fees will be different. I would expect total costs to be lower if you use WiNZ directly.

In answer to your last question, you would sell WiNZ shares in the share market, not to the fund manager.

Some huge institutional investors trade with the fund manager. But not ordinary individuals.

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