Here’s an example to show how this might work in practice.
|Cash in cash facility
|Fund A value
- A switch request is made to switch £5,000 out of Fund A and into Fund B.
- Fund A settles funds within four days.
- Fund B requires settled funds for the purchase of the investment within two days.
When we receive the confirmation of the sell price from the fund manager of Fund A, we place the buy instruction with the fund manager of Fund B to buy £5,000 worth of units in Fund B.
On the account, the transaction will put the cash facility balance to -£4,000, and there'll be a pending transaction for the total switch amount of £5,000. So, although there’s a negative cash balance shown as -£4,000, the value of the product would still show as £50,000.
On receipt of the sell proceeds from the fund manager of Fund A, the transaction will reverse the position and the cash balance will return to £1,000, assuming no further cash has been added to the cash facility between the placing of the switch and receipt of the cleared funds from the fund manager.