KIIDs - Legally required pre-sale, contains info your investors require but nobody polices and nobody notices
Most of us skip the KIIDs when our providers force them upon us. Which is good (sorry, I mean, er, bad!). Because they are often old or simply wrong!
That PDF forced upon you is annoying and you see no point in it, right? Well, I partly agree. Yet contained within that document are often interesting costs and charges disclosures that you shouldn't ignore completely.
I say "completely" as the disclosures are often estimates and not guaranteed. They are also, sometimes, implicit. That is to say kinda made-up since someone or some algorithm calculated this cost was buried somewhere within the process of trading rather than was explicitly charged in the process.
What are you talking about?
This probably isn't the place to discuss "transaction costs" in detail. Let's just say take a look at them, but don't fixate on them. There is so much slack in the calculation of that figure it might render it useless as any basis for comparison to any other manager but useless as any measurement as to the effectiveness of the funds own manager!.
OK, what should I look at?
In short: the OCF. The ongoing charge. This too is an estimate as is subject to change, but it is an indication of the cost to you, the investor, the price you'll pay for hold this fund or ETF. Performance fees are displayed too if you're interested.
The Ongoing Charge is usually deducted from your funds NAV (value) every day and is therefore deducted from the daily share price. It is not a fee you pay in one go at a later date.
The OCF along with some other fees are required to be displayed to you pre-sale. Hence the Key Info Document for Key Investor Info Document.
Great. So what's wrong?
As usual the process is somewhat broken and end investors are being fed out of date information - if any information at all - before buying a fund, investment trust or ETF that requires a KIID to be served.
The mechanics that brokers and platforms use to source these documents (and therefore their Costs and Charges Disclosure requirements) are varied. Some brokers you can see simply store a static KIID. That KIID changes - and on an infrequent basis. That means you can't know when it's gonna change and when you need to change your static PDF in your database! That means you're opening yourself up to the likely scenario you feed your clients out of date KIIDs and out of date charges.
Some brokers outsource the process to the incumbent data vendors and assume that vendor is serving the latest data. Any analysis of a broad enough range of brokers and vendors will show that assumption to be false. The data is old, late or flat out wrong. This centralised error then has a knock on effect to numerous brokers who are the clients' of these vendors. That thousands of clients mis-fed information everyday pre-sale.
The good news?
Shhh. But nobody polices this. Yes, that's right! This is a legally mandated document yet no one monitors the document served is 'correct'. In a time of transparency, tech and the regulators own requirement to "reduce costs" this seems strange.
I made a few videos about it way back in mid 2019. Click here to see them
Having worked on projects that calculated these costs and project teams trying to disseminate these documents via the existing data vendor network I was stunned by the impact these problems have - yet no one pays enough attention to.
So FinKi built something. Now there's an API that can fetch the latest KIID live and direct from the fund manager. There's also then an easily searched FinKi repository that houses all the KIIDs and can be easily queried and downloaded on demand.
I made a very bad and slow demo (on a slow demo server) here way back in 2019
The production API is instant and can be accessed in any way that suits. API. One-off download. Excel. Your choice.
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