Daily Fund Pricing:
Understanding the Basics
The basics of understanding your investments

Unit price, expense ratio...trying to understand how your investments are administered may seem like learning an entirely new language. But don't fret. It's not as complicated as it seems once you understand a few basics. Let's start with the term unit price..

What is the unit price and how is it calculated?

The unit price represents how much each "share" is worth. Assume the unit price of XYZ Fund is $10. This means that each "share" you own of XYZ Fund is worth $10. To calculate the unit price, you start with the value of the fund's assets, i.e., the stocks, bonds and other investments held by the fund. Then you subtract any fees that the fund owes. Finally, you divide the total by the number of shares in the fund.

An example:

The fund's investments are its assets

The assets of a fund include all of the fund's holdings such as stocks, bonds and cash, plus dividends and interest, and also any gains or losses based on current market prices. The market value is based on the closing price each day the markets are open.

How do you know what your investments are worth?

The total value of your investment in any fund is figured by multiplying the number of units (or shares) that you own by the unit price of the fund. For example:

What you should know about fees

There are, of course, certain costs incurred for managing investment funds. These fees are paid to the organization(s) assisting us with the management of our investments. There are three types of fees:

1. Investment management fee—the fee that the General Board of Pension and Health Benefits of The United Methodist Church (General Board) pays to the outside organizations responsible for making the investment decisions for the fund. Typically, this is the largest of the three fees.
2. Custody fee—the fee that our custodian bank earns for holding assets and transferring them (buying/selling securities) as directed by the General Board and the investment management firms.
3. Administration and operating fee—the fee the General Board receives for record keeping and fund administration.

Together, these fees comprise what is commonly known as a fund's "expense ratio."

Expenses are the costs of managing your money

Expenses are paid from a fund's assets. The higher the expense ratio, the lower the fund value. If XYZ Fund has an expense ratio of 0.31%, then 31 cents of every $100 you invest in the XYZ Fund, goes to pay the fund's fees each year. The expense ratio for each of the General Board's funds is posted on our Web site. General Board funds generally have lower expense ratios than comparable funds offered by other financial services firms.

Unit prices are assigned after the close
of each business day

Fund unit values are determined daily at approximately 5:00 p.m. Eastern time. Fund unit values are determined by accumulating the fair value of securities owned by the fund and dividing by the number of units outstanding for the Fund. The fund invests in a variety of asset classes and types of investments. Many of these investments trade on recognized securities markets and have readily ascertainable market values on a daily basis. Some of these investments, such as private equity funds, real estate and other alternative investments, are illiquid. These illiquid investments do not have readily ascertainable market values. For these investments, the fund generally depends upon information received from the issuers of the investments. Many of these illiquid investments only provide the fund with values for the investments on a quarterly or less frequent basis. Therefore, when determining fund unit values, some of the pricing information used by the fund will be three or more months old. As a result, the fund unit value as of any particular day may not reflect the actual fair value of a fund unit on that day.

Because unit prices are not determined until after the markets close at 3:00 p.m., Central time, the posted unit prices that appear on the General Board’s Web site are the closing prices from the previous day and not the prices you will receive if you sell or purchase units of a fund during the current day. After 3:00 p.m., Central time, the value of all the assets held in a fund are totaled and the unit price is determined for orders placed that day. Therefore, if you sold or purchased units prior to 3:00 p.m., Central time, the unit price at which you bought or sold may be higher or lower depending on the change in the value of the stocks and bonds in the fund that day. Participants may not purchase or sell shares at the previous day's prices.

Even funds take an occasional holiday

Unit prices are not calculated on U.S. market holidays or on General Board holidays. A list of these days is posted on the General Board's Web site. If the General Board receives instructions to buy or sell shares in a participant's account on one of these days, the instruction is held until the market closes on the next business day.

The General Board's funds can be found on our Web site.

Unit prices are recalculated each night and posted the next business day by 8:00 a.m., Central time. Because the General Board's funds are not publicly traded, their prices cannot be found in the newspaper.