Model Portfolios - Changes To Rebalancing Questions & Answers

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With effect from 5 September, we’ve launched a solution so that if a suspended fund in a model portfolio is removed from the portfolio, or the investment product is linked to a portfolio that doesn’t include the suspended fund, a bulk rebalance can be successfully carried out.

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What has changed?

The solution means that if the suspended fund is removed from the portfolio or the investment product is linked to a portfolio that doesn’t include the suspended fund then a bulk rebalance can be successfully carried out.

Please note:

  • if you choose to alter the model portfolio during the period of suspension it is your responsibility to review the position after the suspension is lifted and if necessary to relink the previously suspended fund
  • if you choose to alter the model portfolio during the period of suspension, and do not update the model again after the suspension has been lifted, as part of a rebalance we will sell 100% of the holding which is outside of the model portfolio. Even if you don’t rebalance we will use this holding for Fund Sale Instruction (FSI) or Sale for Regular Payment (SfRP) purposes. To avoid this you must update the model portfolio once the fund suspension has been lifted
  • altering the model portfolio may take you away from the intended risk profile of the original model portfolio.
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What are my options for a model portfolio which includes a suspended fund?

You can now opt to realign the remaining funds to equal 100% of the portfolio or you can replace the suspended fund with a new fund. Whichever option you choose, if you rebalance to the new model portfolio then the suspended fund will continue to be held by the customer until you instruct us again (once the fund suspension has been lifted).

Please note: after the suspension has been lifted, as part of a rebalance we will sell 100% of the holding which is outside of the model portfolio. Even if you don’t rebalance we will use this holding for Fund Sale Instruction (FSI) or Sale for Regular Payment (SfRP) purposes. To avoid this you must update the model portfolio once the fund suspension has been lifted.

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A client is linked to a model portfolio that includes a suspended fund and wishes to sell/top up, can they do this?

During the suspension you have the option of unlinking the investment product from the model portfolio, and selling/investing in non-suspended funds as appropriate. Once the suspension is lifted, you can relink their investment product to the model portfolio and rebalance as normal.

Please note: if there is already a Sale for Regular Payment (SfRP) set up when the product is unlinked and subsequently relinked to a model portfolio, a new SfRP confirmation letter will be sent to the client.

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Can a client holding a suspended fund in an unlinked portfolio, link and rebalance tradable funds IN to a model portfolio?

Yes, you can rebalance to a model portfolio which does not include a suspended fund within it, irrespective of whether the client has an active holding within a suspended fund. If they do hold a suspended fund then this will be excluded from any variance calculation and trades placed as part of the rebalance.

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What happens if I submit a rebalance for a model portfolio that still has a suspended fund within it?

The rebalancing service is built on the principle that all funds are available for trading.

  • a single rebalance will allow you to submit this instruction but it will not be placed. Please refrain from submitting rebalance instructions online that contain suspended funds
  • a bulk rebalance will warn you before submission that this cannot be completed.

Refer to the 2nd question for details on how you can work round this.

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What happens to a rebalance with a portfolio that includes a suspended fund that was due to be processed on the day of the suspension?

Unfortunately, the whole rebalance will fail. See the previous question.

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What will happen when the fund suspension is lifted?

Further Q&As are available on our website in preparation for the suspension being lifted.

It’s important to note that if you do not update the model again, or relink to the model portfolio that included the suspended fund, after the suspension has been lifted, we will sell 100% of the holding which is outside of the model portfolio. Even if you don’t rebalance we will use this holding for FSI/SfRP purposes. To avoid this you must update the model portfolio once the fund suspension has been lifted.

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Last updated 3pm 19/09/2016