For investment professionals only

DILUTION ADJUSTMENT –
(SWINGING SINGLE PRICING)

This note provides an overview of the dilution adjustment methodology (also known as swinging single
pricing), which is the approach taken for mitigating dilution costs for BNY Mellon Global Funds, plc.

WHAT IS A DILUTION ADJUSTMENT? BNY MELLON GLOBAL FUND’S DILUTION

When investors make subscriptions or redemptions it may result in
the investment manager buying or selling the underlying
investments of the fund, attracting dealing costs that would be
borne by the fund’s current investors. As a result, long-term
investors could be adversely affected by investors buying and
selling shares in the fund. This effect is known as dilution.
A dilution adjustment is a technique whereby the Net Asset Value
per share (the fund’s dealing price) is adjusted to reduce the
impact of dilution, thereby protecting existing investors. A dilution
adjustment aims to ensure that the investors buying or selling
shares in the fund bear some of these dealing costs and that these
costs are not borne entirely by existing investors.
HOW DOES A DILUTION ADJUSTMENT WORK?
The Net Asset Value (NAV) of a fund is determined using the latest
available mid-market prices of the underlying investments held
in the fund. However, an adjustment to the NAV can be made if
the fund experiences material net subscriptions or redemptions
on a particular dealing day.
The direction of the adjustment depends on whether the fund is
experiencing net subscriptions or redemptions on the dealing
day, while the magnitude of the adjustment reflects the level of
dealing costs within the fund.
However, regardless of whether the price is adjusted up or down,
all investors buy and sell at the same price. So, for example, if the
price for a fund is 120 and the fund’s dilution adjustment is
0.25%, then:
– If the fund experiences material net subscriptions (inflows), the
price is adjusted up to 120.3 (by multiplying
120 by 1.0025).
– If the fund experiences material net redemptions (outflows), the
price is adjusted down to 119.7 (by multiplying 120 by (1 - 0.0025)).
– If the subscriptions and redemptions are not material, or there
is no shareholder trading, no adjustment will be applied and the
price will remain at 120.
ADJUSTMENT PROCESS
The price will be adjusted whenever there are net subscriptions
or net redemptions above a specific threshold. The threshold is
the level when net inflows or outflows reach a size where dealing
costs are deemed material.
The dilution adjustment is applied to the NAV per share, based on
the mid price valuation of the underlying investments. The same
adjustment is applied to all share classes of a Sub-fund.
HOW IS THE DILUTION ADJUSTMENT
CALCULATED?
The extent to which prices are adjusted is based on an estimated
dealing cost made up of a number of elements, including bid-offer
spreads and other transaction costs (e.g. transaction taxes). The
estimated rates are reviewed and updated periodically.
It is worth noting that any investor impacted by a dilution
adjustment is paying/receiving the fair price for their trade,
taking into account the costs of dealing. They are not being
treated unfairly. The process exists purely for the protection of
the existing investors in the fund.
For further information please contact:
UK
Brokersupport@bnymellon.com
0500 66 00 00
International
internationalsales@bnymellon.com
+44 (0)20 7163 2367

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and regulated by the Financial Conduct Authority. CC14256-26-11-2016(12M). T3367 11/15