Unit Pricing Policy
PIMCO Australia Management Limited ("PIMCO RE") is the responsible entity of various registered managed investment schemes (“ Schemes”, “PIMCO Funds” or “funds”). This document sets out PIMCO RE’s policies on discretions relating to the price at which interests in the Schemes are issued (“Application Price”) and withdrawn (“ Withdrawal Price”) has been prepared in order to comply with:
- for Schemes registered before 1 October 2013, ASIC Corporations (Managed investment product considesation) Instrument 2015/847; and
- for Schemes registered on or after 1 October 2013, ASIC Class Orders [CO 13/655] and [CO 13/657].
PIMCO RE’s discretions are generally conferred by the constitution of each of the PIMCO Funds. The exercise of any discretion by PIMCO RE as a responsible entity is subject to the general duties of a responsible entity under section 601FC of the Corporations Act, including, in particular, to act in the best interests of investors and to exercise the degree of care and diligence that a reasonable person in that position would exercise.
PIMCO is a global investment management firm operating across offices in the Americas, Europe and ASIA. PIMCO’s strategic objective is to preserve and enhance investors‘ assets.
PIMCO RE is the responsible entity of PIMCO’s Australian domiciled registered Managed Investment Schemes and is the holder of an Australian financial services licence (487505).
2. Review cycle and version control
This policy is critical to the effective operation of PIMCO in Australia. It is to be reviewed on a periodic basis by the Head of Operations and at any other time as necessary to ensure the policy remains current and in accordance with applicable legal and regulatory requirements.
This policy is available on the PIMCO webiste: pimco.com.au. In addition, PIMCO RE notifies all investors in the PIMCO Funds that they may obtain copies of this document at no charge.
4. Application Price for Units
PIMCO RE will calculate the Application Price for Units in accordance with the provisions of each of the PIMCO Funds’ constitutions and Product Disclosure Statements ("PDS"). The formulas adopted for determining application unit prices in the Scheme constitutions are generally based on dividing a value representing the Scheme's net asset value by the number of units on issue (with an adjustment to add transaction costs). However, alternative methodologies may apply depending on the terms of the particular Scheme constitution.
5. Withdrawal Price for units
PIMCO RE will calculate the Withdrawal Price for Units in accordance with the provisions of each of the PIMCO Funds’ constitutions and PDSs . The formulas adopted for determining withdrawal unit prices in the Scheme constitutions are generally based on dividing a value representing the Scheme's net asset value by the number of units on issue (with an adjustment to deduct transaction costs). However, alternative methodologies may apply depending on the terms of the particular Scheme constitution.
6. Relevant discretions in relation to Application Prices and Withdrawal Prices
There are a number of discretions which are relevant to determining the Application Price or Withdrawal Price of a unit in a PIMCO Fund. These include:
- The method for determining the value of the and liabilities of a fund
- How often and when the value of the funds’ assets and liabilities are determined
- How often and when unit prices will be calculated and take effect
- The circumstances and timing for the suspension of unit pricing and the subsequent resumption of unit pricing
- The rounding methodology used
- The methodology for calculating transaction costs
- When fees and expenses are accrued and how and expenses are allocated between classes of units in the funds
- The methodology for determining the amount of distributable income
- Error rectification
- Determining cut-off times
For the Withdrawal Price, variables associated with a large redemption request – more than 5% of the units on issue for any fund.
7. Specific policies associated with the Discretions PIMCO RE may exercise
7.1 Determining the total net asset value of a fund
Under each PIMCO Fund’s constitution, the total net asset value is calculated as the value of the gross assets less the liabilities excluding the application amount in respect of applications that have not been accepted by the responsible entity.
PIMCO RE has discretion to determine how the assets are valued including the valuation methodology and the timing of the valuation. Asset valuation methodologies are generally developed in accordance with FSC Standard No. 9 Valuation of Scheme Assets and Liabilities.
The net asset value of each fund is calculated by deducting the value of the liabilities from the gross assets. The assets of a fund include all investment assets, capital, income, property and rights of the fund. The liabilities of a fund include all borrowings, contingent liabilities, accrued fees payable, provisions and any other relevant liabilities of the Fund. Other assets and liabilities in a fund, which may include tax, provisions, fees and rebates, are valued in good faith in accordance with industry standards. In particular:
- Fees will be accrued on a daily basis
- Expenses will be accrued daily using a reasonable estimate of annual expenses, with reconciliations and adjustments to reflect actual (rather than estimated) expenses occurring at least annually
- Generally, PIMCO Funds do not charge performance fees but where performance fees are charged they will be accrued on a daily basis. The performance fee methodology (if applicable) is outlined in the fund’s PDS or Information Memorandum.
- Tax liabilities are calculated in accordance with relevant taxation laws. As tax is paid in the hands of the investor, a tax provision is not included in the unit price for the fund, and
- The unit price of the fund does not take into account tax credits collected by the funds. Tax credits will generally be distributed to investors at each distribution period.
7.2 Selection of valuation methodology
Investment assets are valued using the following guidelines:
- Security prices are obtained, where possible, from independent security pricing services, and are based on market price where the asset is traded on a regulated market.
- Securities will be fair valued in good faith consistently with ordinary commercial practice for valuing property of the relevant kind: (i) in the absense of market-based data; (ii) in the event market data does not accurately represent fair value; (iii) if a significant event occurs that materially affects the value of a security; (iv) if a security trades on a market that has been or disrupted as a result of an unusual or extraordinary event, and/or if a security is halted from trading on the exchange on which it is traded; or (v) in unusual circumstances. In no event shall the Portfolio Managers be exclusively responsible for valuing a security.
- The PIMCO Funds may invest in other managed funds by other PIMCO Group members. Where this is the case, the daily valuation of holdings in the PIMCO Funds for unit pricing purposes is reliant on the timely provision of unit prices from the underlying PIMCO managed funds.
- In all cases investments are valued with a view to producing a price or valuation which is reasonably current.
The function of sourcing asset valuations on behalf of PIMCO RE has in most cases been outsourced to State Street Australia Limited (“the administrator”). PIMCO RE determines the asset valuation methodologies of the administrator, which specify how assets under custody are valued and how security prices are sourced. Whilst the administrator performs the asset valuations, PIMCO RE retains the responsibility to ensure that all asset valuations are determined in accordance with each Fund’s PDS or Information Memorandum, constitution and relevant legislation, standards and guidelines.
7.3 How often and when the value of the funds’ assets and liabilities are determined
PIMCO RE is permitted to cause an asset of a fund to be valued at any time and must do so as and when required by the Corporations Act 2001.
PIMCO RE or the administrator will calculate the value of the assets and liabilities of a fund at intervals specified by PIMCO RE in a fund’s PDS or information memorandum.
PIMCO RE may exercise its discretion to calculate the value of the assets or liabilities of a fund:
- More frequently or less frequently if PIMCO RE believes it is reasonable to do so;
- At a different time if there is a change of circumstances that necessitates the change.
7.4 How often and when unit prices will be calculated and take effect
PIMCO RE or the administrator will calculate the unit price of a fund at intervals specified by PIMCO RE in a fund’s PDS or information memorandum. Generally, this unit pricing will be undertaken on a daily basis. In the event that unit prices are not calculated daily, they must be calculated at least as frequently as application and withdrawals requests are processed. Where there is discretion in relation to a fund to determine the frequency of unit pricing, PIMCO RE will consider relevant factors including the frequency of transactions and the nature and availability of valuations for underlying assets of the fund.
The release of a unit price may be delayed if there is uncertainty as to the correctness of a component of the unit price.
Generally, unit transactions (including application and withdrawal requests) will be processed using the price applicable to the date the request was received, taking into account applicable cut-off times as set out in a fund's PDS or information memorandum. In some circumstances, where permitted by law, it may be necessary or appropriate for a unit transaction to be "backdated", that is, processed at a price applicable to an earlier date to ensure transacting investors receive appropriate value for the effective date of their application or withdrawal requests.
7.5 Suspension of valuation and pricing
It may be necessary for PIMCO RE to determine, where it is in the best interests of members to do so:
- to suspend valuation of the funds' assets and liabilities where the value of assets and liabilities cannot be appropriately valued or estimated; or
- to suspend the processing of transactions where unit prices cannot be appropriately determined.
Application and withdrawal requests received during these times will be processed using the unit price applicable on the first day after PIMCO RE has lifted the suspension.
7.6 Rounding Methodology
Where PIMCO RE has a discretion under a fund’s constitution to round the unit prices calculated, the issue price and withdrawal price will be rounded up or down to the number of decimal places specified in the constitution or as determined by PIMCO RE in accordance with market practice. Where rounding has resulted in fractions of units that are not allocated to investors, any excess will remain in the relevant fund at all times.
7.7 Transaction costs
Estimated transaction costs may be allocated when an investor buys or sells units in a fund by incorporating a buy/sell spread in the relevant entry and/or exit unit price. As at the date of this policy PIMCO RE does not impose a buy spread on Application Prices or distribution reinvestments, but does impose a sell spread on Withdrawal Prices.
A sell spread is a cost charged to exit (redeem units in) a fund. This aims to ensure that other investors do not pay the transaction costs associated with a particular investor redeeming units in a fund. PIMCO RE does not benefit from buy or sell spreads. In circumstances where no transaction costs are incurred because there is no trading of underlying assets (for example where an application or withdrawal request is funded by an in-specie transfer of assets) PIMCO RE may waive or reduce the sell spread. The sell spread will be determined on an amount which PIMCO RE considers to be a fair allowance for the costs of selling the assets of a fund. These costs are reviewed regularly and the calcaulation of the relevant amount will vary depending on the type of assets held by the relevant Fund.
The sell spread associated with each PIMCO Fund is disclosed in the fund’s product disclosure statement or information memorandum.
7.8 Allocations between classes of units
Where there is more than one class of units in a fund, PIMCO RE is required to allocate the assets and liabilities of the fund between relevant classes to ensure the net asset value of each class is accurate and fair. PIMCO RE will follow the respective strategy for each fund to determine the appropriate allocation of assets, liabilities, revenue and expenses between classes.
7.9 Fees and expenses
PIMCO RE will calculate fees and expenses in accordance with the provisions of each of the PIMCO Funds’ constitutions and product disclosure statements. PIMCO RE reserves the right to charge a fee up to the maximum amounts stated in each fund's constitution, The Management Costs include Responsible Entity fees, investment management fees, performance fees, custodian fees, administration fees, indirect costs and other expenses but exclude extraordinary expenses such as litigation costs, the cost of convening an investors’ meeting and other costs (as reasonably determined by PIMCO RE). The Management Costs are calculated and accrued daily based on the net asset value ("NAV") of the relevant Fund. The accrued fees are paid in arrears from the assets of each Fund at least quarterly. The Management Costs reduce the net asset value of the relevant Fund and are reflected in the unit price for that Fund.
Where provided for in the relevant fund's consitution, there may be a performance fee payable in relation to a fund (and if so this will be disclosed in the fund’s PDS or Information Memorandum). Subject to the fund's consitutiton PIMCO RE will determine the appropriate methodology for calcaulating performance fees, including detailing the testing and review of the methodology to ensure it is appropriate to the particular fund.
7.10 Determining distributable income
An investor’s share of any distributable income is calculated in accordance with the Constitution and is generally based on the number of units held by the investor at the end of the distribution period.
The distributions each investor receives are generally assessable income and can be made up of both income and realised capital gains. Distributions are generally calculated based on the Fund’s net income at the end of the distribution period divided by the number of units on issue. This gives a distributable income amount per unit. Each investor's distribution entitlement is then determined by multiplying the number of units held by the distributable income amount per unit. An investor who invests during a distribution period may get back some of their capital as income.
7.11 Dealing with Large Redemptions Requests
Where an investor makes a large withdrawal request (as set out in the PDS or Information Memorandum, but generally 5% or more of the units on issue at the start of the relevant distribution period for the relevant class), their withdrawal proceeds may be taken to include a component of distributable income.
Where an error occurs in relation to the valuation of assets or liabilities or the calculation of a unit price, PIMCO RE:
- must review the error as soon as reasonably possible to determine the effect on investors during the relevant period and whether investors should be reimbursed or whether PIMCO RE has overpaid an investor (in which case PIMCO RE may, if entitled, seek to recover any overpayment);
- must consider whether any investors who have withdrawn their investment from the relevant fund should be contacted;
- may retroactively change the relevant unit price where it believes a revised price more accurately reflects fair value;
- must maintain a record of any pricing errors identified and documentation supporting the results of the reviews and action taken.
8. Are our discretions reasonable?
Unless otherwise specified, a policy underpinning each discretion has been developed in accordance with industry standards, some of which are outlined in relevant standards and guidance notes issued by the Australian Securities and Investments Commission (ASIC) and Australian Prudential Regulation Authority (APRA) Unit Pricing Guide to Good Practice. PIMCO RE accordingly believes it is reasonable to exercise each discretion under this policy.
9. What records will we keep?
In accordance with the relevant ASIC Instrument and Class Orders, PIMCO RE will retain this policy for seven years after this policy ceases to be current. PIMCO RE will also retain documentation of circumstances where the exercise of discretions are not covered by this policy or involves a departure from this policy and these will be available from us free of charge.