Box Management

This is really only relevant to UK funds. In the UK, fund managers are allowed to have their own holding in a fund. They can do this either as an investment or so that they have some units at their disposal with which to facilitate smooth trading in the fund by investors. This holding is referred to as the Managers box.

The regulations require that the number of units in the Managers box can never be negative. Eg. if 100,000 units are issued to investors, the Managers box holding cannot be negative 10,000 units so that the total units in issue is 90,000 units.  The reason for this is that otherwise by taking a negative holding a Manager would profit if the price of units actually fell; this would be in conflict with the interests of investors.
 

Interview Tip:

Some Managers manage the box as an investment and therefore actively take large box positions. However, it is more common for Managers to manage their box so as to have the smallest position possible whilst avoiding negative boxes.

In theory, a Manager could use his box to facilitate late trading. This would be in breach of the regulations and it is important that a Manager does not do this either advertently or inadvertently.

You should be aware of Late Trading and the importance of not allowing deals after the valuation point.

See www.funds-axis.com for articles on Box Management strategies and Late Trading.