C1T6L3 · Revised 2026-10-26

Decision and objectives

Practical task: Calculate a BYF investor result from basket growth and two execution prices

Objectives: Measure spread and premium effects; Separate tracking difference from tracking error; Reconcile total ownership cost over a holding period.

Required prior knowledge: C1T6L2. Classification: domestic. Revision: 2026-10-26. All fictional names, prices, rates, fees, calendars and tax schedules below are hypothetical unless explicitly identified as a dated document observation.

The ongoing expense ratio can be smaller than the cost of entering at a premium and leaving at a discount. Total ownership cost combines portfolio implementation with the investor's execution, holding and exit costs. Measure each on a declared base; do not add overlapping estimates or subtract embedded expenses twice.

Mechanics

The bid–ask spread is ask minus bid; a relative spread often divides that difference by their midpoint. Premium/discount compares a market price with matched unit value. Tracking difference compares fund and benchmark returns over a period. Tracking error measures variation in their periodic differences. An investor's exchange return adds the change in premium/discount and trading costs to the unit-value path.

A BYF with a very small tracking error can systematically lag the benchmark after expenses. Another may have low annual expense but a wide spread for the investor's size. Compare actual holding horizon and turnover: repeated trading compounds spread costs that a long-horizon expense ratio does not capture.

Price and return drivers

For a simplified no-distribution case, investor net return = (sale cash − exit charges − assumed tax − initial all-in cash) / initial all-in cash. Basket growth is only an intermediate step. If the supplied unit-value path is already after fund expenses, it is the correct starting value path; subtracting an annual expense ratio again is wrong. Premium compression can create a loss even if NAV rises.

Worked case

Hypothetical BYF NAV starts at TRY 100 and rises to TRY 104, already after embedded expenses. The benchmark rises 4.5%, so annual tracking difference is 4.0%−4.5% = −0.5 percentage points. Investor buys 100 units at ask TRY 102, a 2% premium. Entry commission is TRY 20: total outlay TRY 10,220. At exit the bid is TRY 103, a 103/104−1 = −0.9615% discount to NAV; sale cash TRY 10,300. Exit commission TRY 20 and custody TRY 10 leave TRY 10,270 before investor tax. Under an invented tax schedule charging 10% of the positive price gain before commissions, taxable gain is TRY 100 and tax TRY 10. Net final cash TRY 10,260; net profit TRY 40; return 40/10,220 = 0.3914%.

At entry, if bid is TRY 101 and ask TRY 102, relative spread is 1/101.5 = 0.9852%. It is not a second realized charge to subtract from the actual-price ledger; actual entry and exit prices already contain spread effects.

Adverse case

NAV instead ends at TRY 101, while the exit bid is TRY 99. Before tax, sale cash less TRY 20 exit commission and TRY 10 custody is TRY 9,870. Under the invented no-tax-on-loss rule, loss versus TRY 10,220 outlay is TRY 350, or 3.4247%. NAV gained 1%, but premium/discount movement and costs produced an investor loss. The original hypothetical benchmark difference also cannot predict a stressed liquidity discount.

Practical use

For a domestic listed fund, check actual order-book size, quote time, settlement, commission including applicable service taxes, custody and fund expenses. The worked fees are all-in invented charges; no extra unlisted charge is silently assumed. Actual investor taxation requires year, residence/status, classification, acquisition date and effective rules, including allowable cost-basis deductions. The invented tax base above is deliberately supplied and must not be treated as Turkish law. Record any exclusions when comparing alternatives.

Decision boundaries

Use the full ledger for the planned holding period and transaction size. Do not compare only expense ratios or treat a measured premium as permanent. Defer a small expected-gain trade if certain spread and charges consume the advantage or if adequate exit depth is unavailable. A limit price can control one execution boundary, while unfilled orders, timing and basket movement remain. A tracking statistic does not guarantee market liquidity.

Practice and references

Exercise: hypothetical 50 units bought at TRY 40.40, entry commission TRY 5; later sold at TRY 41.00, exit commission TRY 5; no custody and invented tax 10% of the positive raw price gain. Published NAV expenses are already embedded. Answer: initial outlay TRY 2,025; gross sale TRY 2,050; raw gain TRY 30; tax TRY 3; final cash TRY 2,042; profit TRY 17; net return 0.8395%. Do not subtract a spread estimate in addition to these executed prices.

Takeaway: ownership cost is the entire cash ledger, including how market price departs from value.

Reference guide: domestic-byf; spread; premium-discount; tracking-difference; tracking-error; holding-period-return; spread; tracking-difference; tracking-error; total-ownership-cost. Next: C1T6L4. Topic test.

Sources: SPK Communique III-52.2 — Articles 3–4 definitions; creation/redemption and index tracking sections; date 2013-11-27; checked 2026-10-26; Borsa Istanbul Equity Market Products — BYFs; real-estate certificates; commodity certificates / ALTIN.S1; date not stated; retrieved 2026-10-26; checked 2026-10-26. Source records: sources.json. Check the cited rule dates and confirm current dealing terms before any transaction.

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