Notification of changes to the underlying funds of various BlackRock funds
26 March 2020
- J77 BlackRock US Flexible Equity
- M82 BlackRock World Gold
- P56 BlackRock Japan Opportunities
- P69 BlackRock Sustainable Energy
- P70 BlackRock World Mining
We have been notified by BlackRock Global Funds (the “Company”) of the following changes to dilution adjustments (swing factors) of the underlying funds of the above named funds, which have taken effect from 18 March 2020 (the “Effective Date”).
For more details of these changes, please see the below, which has been extracted from the Shareholder letter of the underlying funds of the above named funds:
“As set out in the Prospectus (Appendix B, paragraph 17.3), the Directors may adjust the Net Asset Value per Share for a Fund in order to reduce the effect of “dilution” on that Fund. Dilution occurs when the actual cost of purchasing or selling the underlying assets of a Fund deviates from the carrying value of these assets in the Fund’s valuation, due to factors such as dealing and brokerage charges, taxes and duties, market movement and any spread between the buying and selling prices of the underlying assets.
Dilution may have an adverse effect on the value of a Fund and therefore impact shareholders. By adjusting the Net Asset Value per Share this effect can be reduced or prevented and shareholders can be protected from the impact of dilution. The Directors may adjust the Net Asset Value of a Fund if on any Dealing Day the value of the aggregate transactions in Shares of all Share Classes of that Fund results in a net increase or decrease which exceeds one or more thresholds that are set by the Directors for that Fund. The amount by which the Net Asset Value of a Fund may be adjusted on any given Dealing Day is related to the anticipated cost of market dealing for that Fund.
Prior to the Effective Date, in such circumstances the Net Asset Value of the relevant Fund could be adjusted by an amount not exceeding 1.50%, or 3% in the case of fixed income Funds, of that Net Asset Value. The adjustment will be an addition when the net movement results in an increase in the value of all Shares of the Fund and a deduction when it results in a decrease.
The Commission de Surveillance du Secteur Financier has published an update to its “FAQ CSSF on Swing Pricing Mechanism” noting that as a result of the exceptional market circumstances involved by the COVID-19, a temporary increase to the maximum swing factor set out in the Prospectus would be permitted, provided the decision is duly justified and in the interests of investors.
From the Effective Date, the Directors determined that as a result of a significant increase in transaction costs, it became necessary to exercise the ability to temporarily increase the maximum dilution adjustment, in order to protect the interests of shareholders, in the case of all Funds of the Company. These revised swing factors are the result of a robust internal governance process and are based on a robust methodology (including market / transaction data based analysis) that provides for an accurate Net Asset Value which is representative of prevailing market conditions.
The increase to the dilution adjustment amounts will be temporary, whilst the period of exceptional market circumstances persist. Shareholders will be notified of the return to the original dilution adjustment amounts in due course.
The Prospectus will be updated to reflect that the dilution adjustment may be increased beyond the stated limits in exceptional circumstances.”
Should you have any questions regarding these changes, please contact International Funds & Investments.