Swing pricing

In Q3 2015, swing pricing received prominent attention in U.S. markets when the Securities and Exchange Commission (SEC) suggested permitting its use as an anti-dilution mechanism for mutual funds. At the same time, the ALFI Swing Pricing Working Group was already updating its Swing Pricing Guidelines and had just conducted its Swing Pricing Survey.

Swing pricing has been applied in Luxembourg for the past 15 to 20 years. It has proven to be an efficient mechanism to protect existing shareholders from dilution associated with shareholder purchases and redemptions, as well as an additional tool to help funds manage liquidity risks. This technique is therefore perfectly in line with ALFI’s main objectives to protect investors and foster dedication to professional standards, integrity and quality.

ALFI’s new Swing Pricing Guidelines reaffirm key principles, reflect the evolution in working practice and provide clarification on a number of technical points in areas such as calculation of the swing factor, transparency and fund corporate actions.

The Third edition of ALFI’s Swing Pricing Survey, which was conducted throughout July to September, targeted the largest 65 Luxembourg asset managers. 45 companies participated to the survey. They represent approximately USD 2.5 trn assets under management, which equated to 69% of all assets of Luxembourg domiciled funds in July 2015. The trend towards greater adoption of swing pricing continues.