The growing allure of swing pricing

Swing pricing is growing in popularity, says the Association of the Luxembourg Fund Industry). ALFI says the third edition of its occasional Swing Pricing Survey shows a greater number of asset managers have adopted the practice.

It adds that swing pricing, which has been applied in Luxembourg for the past 15 to 20 years, 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.

The 2015 version of the survey was conducted by an ALFI working group from July to September 2015, targeting the largest 65 Luxembourg asset managers; 45 companies participated, representing approximately US$ 2,500 billion of assets under management.

Two out of three respondents, who manage a combined $1,900 billion of net assets (54 percent of total assets under management in Luxembourg funds) apply swing pricing. Moreover, over half of the asset managers not yet applying swing pricing stated they were in the process of evaluating it, and wanted to understand more about the key principles, drivers and theories.