Ever since there were banks, the so-called agio has probably also existed. In the language of the financial world and on the stock exchange, the term “agio” is also referred to as “premium” or “price premium”. Agio literally means something like “convenience” or “leeway”; in the case of a fund, it is to be understood as a kind of distribution fee. It also happens with issues of shares and bonds, the issuers determine how high the premium is.

The premium is usually given as a percentage of the underlying nominal value, but it is not very often that the premium is given in absolute numbers. If a premium of three percent is charged for a security with a nominal value of 100 euros, the purchase price is 103 euros.

The term is not infrequently associated with shares, but the premium is also used in other areas. Knowing about premiums can be very helpful for comparing fund offers or the transparency of fund statements. In many constellations, the premium represents a kind of commission or remuneration for the broker or seller of a financial product.

Here are some application examples of Agio

Share issues

When new shares are issued, the premium is referred to as an issue surcharge, the amount by which the issue price exceeds the nominal value of the share. If the stock market value of the shares in a new issue is higher than the equity shown in the balance sheet, the difference is settled via the premium, since the premium is booked as capital reserve and not as subscribed capital.

Funds

When buying fund units, most fund companies charge this surcharge to cover distribution costs. It is added to the investment amount. The following amounts are customary in the market:

Money market funds: Up to 1 percent

Pension funds: 2 to 4 percent

Equity funds:  3 to 6 percent

Open real estate funds: 5 to 5.5 percent

If you want to buy fund units from a fund company and they ask you to pay a premium, this must be stated in the sales brochure or information.

Bonds

In most cases, bonds are initially issued at face value, but issues at a premium or discount are also possible. If a premium is charged, the effective interest rate on a bond is reduced, since the calculation basis for the interest is the nominal value

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