Same as most of the passive funds in the investment market, the Passive Global Equity Investment Fund under the Provident Fund Scheme for Workers in the Public Services, namely “iShares Developed World Index Fund (IE) - Institutional Accumulating Class”, has the bid-ask spread. The rationale behind of introducing bid-ask spread is that it will protect other investors of the fund through this "User Pays" principle. Investors who invest in the fund have to pay the transaction costs arising from subscriptions or redemptions.
Currently, the theoretical limits of the bid-ask spread of the fund are 0.06% (Ask)/0.02%#(Bid) respectively. The theoretical prices of subscription/redemption are calculated based on the net asset value (NAV) after adding/deducting the related percentages. For instance, the NAV of the fund on a particular dealing date is USD10, the highest theoretical prices of subscription and redemption on that day are USD10.006/USD9.998* respectively.
# With effect from 18 May 2023, the theoretical limits of the bid-ask spread of the fund were reduced from 0.08%/0.03% to 0.06%/0.02% respectively.
* Assuming that the NAV of the fund on a particular date is USD10, the related highest theoretical prices would be paid by investors if there are only subscription or redemption transactions within such accumulating class during the same day. That is, investors would need to deal at the highest theoretical prices of USD10.006 (subscription) / USD9.998 (redemption) respectively. However, under the offsetting mechanism of the fund internal transactions, the actual bid-ask spread paid by related investors should be lower than that of the theoretical bid-ask spread if there are subscription and redemption transactions simultaneously within such accumulating class during the same day.