Low yields.

[Snoopy]

Are you saying that bond redemptions can adversely affect the value of the holding of those still in the fund? Seems wrong, that that should occur that is.

If you are investing in a 'closed fund' that is accepting no more new money from clients then 'no'. Because redeeming money from such a fund is just selling your existing fund units to someone else.

HOWEVER, the picture changes if you are investing in an open fund such as NZB that has no limit on the extent of cash contributions. In that instance, then the answer is 'yes'. If you wish to withdraw units from NZB in the current market at short notice (as all withdrawal notifications are), then it is very likely some bonds will have to be sold at a loss to meet your repayment demands. Fortunately you personally do not suffer the burden of that loss alone, because the burden of that loss is spread over all the unit holders in the fund. This means that you personally get your money out shouldering just 0.0001% of that loss (0.0001% being the value of your holding sold in proportion to the total value of the fund) whereas the rest of the loss (99.9999%) is shared around the unit holders that remain. It is an example of fund management with a 'communistic tint', where all losses are shared equally.

Very good for you if you want out. Perhaps not so good for those who remain. But the losses you caused to others by your 'sale demand' only affect their balances by a 'tiny bit'. Perhaps half a cup of coffee per year? And since coffee isn't that healthy for you anyway, it is probably best if you think of yourself as providing a 'health benefit' to others by selling out. You, as a seller, are a 'national health hero' improving the health of a whole nation (or all the other unit holders at least). Doesn't that make you feel good?

SNOOPY