Managed funds are growing in popularity in Australia. In this article, we discuss some recent developments and explore some of the things you may need to consider.

What are managed funds?

Managed funds allow you to pool your money together with other investors so that you can invest in a range of assets that may otherwise be out of your reach. Some focus on a particular asset class, such as property, while others invest in a combination of assets (shares, property, infrastructure, bonds and cash).

Why are managed funds a popular investment option?

  1. Diversification: By spreading investments across different fund managers, companies, industries, sectors and/or countries, managed funds lessen the risk that one bad investment will significantly reduce the overall value of the portfolio. To achieve this level of diversification on your own, you would need large sums to invest.
  2. Liquidity: Typically, you can easily redeem parts or all of your share/units.
  3. Access to a broad range of expertise: Managed funds are managed by a professional fund management team who provide you with expert fund management (research, select and monitor your investments) as well as regular reporting. When you invest in a managed fund you have access to a broader range of assets that may not be readily available (or affordable) to smaller individual investors. You can also access a broad range of assets or markets with a relatively small amount of cash.

Recent developments

There are new services available to allow investors even easier access to managed funds. For example, the Australian Stock Exchange has recently launched an mFund Settlement Service which allows investors to buy, hold and sell units in unlisted managed funds through a process similar to buying and selling shares. This development provides greater choice, control and flexibility when constructing portfolios.

Things to consider

When investing in a managed fund, you should be aware that returns are not guaranteed, future returns may differ from past returns, and the value of your investment may vary. There may also be the risk of loss of invested capital. That’s why, before making a decision you should always read all relevant documentation, conduct your own independent investigations and analysis of the fund, and obtain appropriate financial, legal and tax advice.