Post distribution prices?

Can anyone tell me what historically happens to the Navra unit price post distribution?

Thanks,

Interestingly, I got an email from a soon-to-be-member answering exactly this question. I'll get him to sign up and post his analysis.

The NavraInvest web site allows download of full history of daily unit prices, load this into a spreadsheet and have a look at what happened at the end and start of previous quarters. Makes for pretty charts too.

Seems to me that the unit price appears to drop by exactly the amount of the distribution.

So regardless of buying pre or post will end up with the same amount invested.

But to buy pre means some income is realised and a tax liability is created. It might suit my situation to buy post.

Comment?

Cheers,

I have tried to analyse what happens to the Navra unit price post distribution because I was about to invest into Navra fund myself and wanted to know whether I should hurry and make an investment before September 30 (end of the quarter) or immediately after the distribution.

As Sim has mentioned earlier in the thread, I have offered him to post my analysis when I wasn’t yet a member of the forum.

I have submitted my application to invest into the Navra fund today (which indicates to what conclusion I have arrived in my analysis ) and thought that I will be able to post myself in a few days as NavraInvest client, but Sim has kindly organised for me to join the forum today.

So here is what I’ve come up with.

Firstly, two important excerpts from the PDS:

“Distributions are not pro-rated for investors who were not unit holders for the whole quarter. Therefore investors who subscribe for units just before a quarter end will receive the full distribution for that quarter.”

“Immediately after an income distribution the net asset values of the Funds falls by the same amounts as the distributions. If you invest just prior to the distribution, the payment is a return on your investment. If you invest just after the distribution the unit price is correspondingly lower.”
My assumptions:

- Unit price before distribution is higher
- Unit price drops immediately after the distribution
- Record distribution is expected at the end of the month (I have based the calculations on 6% although it may be more) according to Steve Navra post http://www.invested.com.au/forums/sh...58&postcount=4
- Investment amount - $10,000
- Calculations are done based on Application price (although I have read in PDS that some calculations are done according to Redemption price)

I have downloaded a history of Unit Prices for period 09/09/2003 – 21/09/2005 and highlighted Unit Prices for last day of each quarter and the next day:


(Date) (Application Price) (Redemption Price) (Price Drop % based on Application Price)

30/09/2003 1.0421 1.0389
01/10/2003 1.007 1.004 3.37%
31/12/2003 1.0172 1.0142
02/01/2004 0.9873 0.9843 2.94%
31/03/2004 1.0236 1.0206
01/04/2004 1.0086 1.0056 1.47%
30/06/2004 1.0286 1.0256
01/07/2004 1.0136 1.0106 1.46%
30/09/2004 1.0728 1.0696
01/10/2004 1.0369 1.0337 3.35%
31/12/2004 1.1583 1.1549
04/01/2005 1.1262 1.1228 2.77%
31/03/2005 1.1314 1.128
01/04/2005 1.0967 1.0935 3.07%
30/06/2005 1.1241 1.1207
01/07/2005 1.0729 1.0697 4.55%

Average Price Drop: 2.87%

Unit price drops immediately after Distribution in a range of 1.47% to 4.55%
Unit Price drop average = 2.87%

Test Cases for Investment amount = $10,000

Investment $10,000.00
Potential Distribution (%) 6.00%
Potential Distribution ($) $600.00
Current Unit price (22/09/05) 1.1645
Unit price after distribution (2.87% drop) 1.1311

1) Investing AFTER distribution:

Units bought before distribution 8,587.38 = 10,000 / 1.1645
Units bought after distribution 8,841.24 = 10,000 / 1.1311
Extra units bought after distribution 253.86

2) Investing BEFORE distribution:

Extra units bought with the distributed money 530.47 = 600.00 / 1.1311

My conclusion – providing the expected distribution is greater that potential drop in unit price (remember – maximum 4.55% since 30/09/2003) it is be better to invest before the Distribution, i.e. in the next few days.

Any comments will be highly appreciated.

I have just sent in a top up for my Navra, should be in time to get this quarter's return. I will use the proceeds to reduce non-deducable PPOR debt, but as the entire investment is borrowed, this is part of my non-deductable to deductable transfer plan. eg Invest $10k, few days later its worth $9.5k (at least I hope ). I owe $10k deducable, but my PPOR debt has just reduced by $500 (pre tax of course). The borrowed funds are from LOC off PPOR so $10.5k has shifted.

Not that deductions are the main factor, not at all. I hestitated to top up not becuase near end of quarter with the distribution reducing my invested capital value, but because the market is quite high right now, and I normally try to time fund purchases when it is low - think of this as dollar cost trading of a dollar cost trading fund

Hi Maverick

My maths co-processor is a bit fried atm from financial ratio analysis...but 2 comments:

1) what about the buy-sell spread? 5 basis pts isn't it?
2) aren't you converting capital into income (and thereby creating a potential tax liability this year) by investing just before the distribution date... wouldn't it make sense to wait until after the distribution date...

Just shooting from the hip here...

N.

In addition I think I understand that you are comparing a potential 6% distribution with an average fall of 2.87%.

We can see that the falls almost exactly mirror the distributions over the limited history of the fund.

So surely you should be comparing a 6% distribution with a 6% unit price fall?

In this case the real difference (to me anyway) is the taxable income generated which I need to pay tax on - even though it has been reinvested.

I think it is a no brainer for me to wait until post distribution and buy units at a 6% discount with no tax owing.

Does this logic make sense? I am no expert and would welcome feedback.

Thanks,

As an aside, while you can download the daily Unit Price from NavraInvest, I'd also like to be able to view a history of the actual Quarterly Distributions.

If anyone from NavraInvest checks these posts, perhaps they could put this on the 'enhancement list'?

http://www.navrainvest.com.au/index....t=distribution ... click on the "Year 04/05" to see each quarter's distribution.