Managed funds provide a way for investors to gain diversification from managed portfolios overseen by professional investors. They also allow individual investors to gain exposure to assets and strategies that would otherwise be difficult to access.
Read on to learn more about how managed funds work and the risks and benefits of having them in your portfolio.
What is a managed fund?
A managed fund is a pool of investor capital professionally managed by a portfolio manager who buys assets – such as stocks, bonds, property and private credit – and manages them on behalf of all investors in the fund.
How do managed funds work?
Managed funds take investor capital and invest in either specific asset classes or across a number of asset classes. Investors don’t directly own the underlying assets but own units in the managed fund. The unit price reflects the portfolio’s underlying value.
Managed funds also pay distributions from income earned on underlying investments. Some managed funds are unlisted, which means investors have to fill in an application form and apply to purchase units in the fund.
Types of managed funds
Fund Asset Class | Portfolio Holdings |
|---|---|
Equities | Investment includes Australian or global stocks. Stocks have historically offered higher returns than other asset classes, but with more risk, depending on stock selection. |
Bonds | Investments include government and corporate bonds. A lower risk and lower return option that can provide income. |
Property | Investments can include shares in listed property companies and physical property. Risks, returns and liquidity can vary. |
Private credit | A growing asset class. Investments are typically loans made to borrowers by non-bank lenders. Risk depends on factors like the borrower’s creditworthiness. |
Multi-asset | Funds that offer exposure to multiple asset classes. Risk depends on asset allocation among underlying assets such as stocks, bonds and cash. |
Cash | These are generally low risk and low return. Investments include short-term government bonds, money market instruments and bank bills. |
How to choose a managed fund?
When exploring managed fund options, there are several general factors that individuals may find useful to consider in relation to their own investment objectives and risk tolerance. Understanding these aspects can help assess the suitability of different managed funds.
Among the initial considerations are an individual’s investment time horizon and risk appetite, as different managed funds cater to varied long-term or short-term return expectations and levels of risk.
Another area for consideration is a fund’s performance track record. While past performance is not indicative of future results, reviewing the consistency of a fund’s performance against its stated benchmark or objectives over various timeframes can be an insightful part of the evaluation process.
The fees associated with a managed fund are also an important consideration. Prospective investors might consider whether the fees align with the potential value the fund manager aims to provide.
Read the Product Disclosure Statement. This is essential to understanding all the risks and fees associated with the managed fund. Also read the Target Market Determination which will describe the class of consumers that comprises the target market for the managed fund and matters relevant to the fund’s distribution and review.
Finally, consider seeking financial advice on whether the Fund is appropriate for your needs, financial situation, and investment objectives.
It is important to note that this is a general list of considerations and is not exhaustive; there are many other factors that may be relevant to an individual’s specific circumstances.
Investing in a managed fund
There are many managed fund options available across the ASX, Wall St and unlisted fund sector.
Stake has also just launched Stake Accumulate.
Here are a few features of the fund:
- Target consistent earnings: The fund is equipped with a limited income buffer designed to give investors priority entitlement to fund income. Of course, there is always a risk that target returns aren’t met. Please read the PDS for details available on the Stake website.
- Accumulate your gains: Distributions are automatically reinvested into the fund at the end of each month, although you can elect to receive cash if preferred.
- Easy access to your cash: You can move your money in and out of the fund, with no exit fees.
You can learn more about how Stake Accumulate works here or read the PDS.
Risks of investing in managed funds
Managed funds have risks like all investments. Risks to your capital can come from the asset class the portfolio is exposed to.
For example, share-based managed funds typically carry a higher risk than a government bond managed fund.
There is no guarantee the portfolio manager will either outperform their selected index or generate a positive return. Returns will depend on portfolio managers' investment skills and the general market sentiment surrounding the fund’s underlying assets.
Before making an investment in a managed fund you should consider all of the risks of doing so, whether the fund is appropriate for your circumstances, and if necessary, seek professional advice. Read and consider the Product Disclosure Statement (PDS) for the fund you are considering for a full appreciation of the risks associated with investment.
🎓 Learn more: How to start investing in a managed fund
Managed funds FAQs
Disclaimer
This information is prepared by Stakeshop Pty Ltd (ACN 610 105 505 [CAR 001241398]) (Stake), who is an authorised representative of Stakeshop AFSL Pty Ltd (AFSL 548196). The Stake Accumulate Fund ARSN 680 653 374 (Fund) is issued by K2 Asset Management Ltd (ABN 95 085 445 094 AFSL 244 393), a wholly owned subsidiary of K2 Asset Management Holdings Ltd (ABN 59 124 636 782).
This information is produced in good faith and does not constitute any representation or offer by K2 or Stake. It is subject to change without notice and is for general information purposes only and is not complete or definitive. K2 and Stake do not accept any responsibility and disclaim any liability whatsoever for loss caused to any party by reliance on the information contained in this article. This information is not financial advice. Any advice and information contained in this article is general only and has been prepared without taking into account any particular circumstances and needs of any party.
Read and consider the Fund Product Disclosure Statement (PDS) and Target Market Determination (TMD). Consider seeking independent financial advice on whether the Fund is appropriate for your needs, financial situation, and investment objectives. All investments carry risk. Past performance is not a reliable indicator of future performance. Offers to invest will only be made in the PDS, and this material is not intended to substitute the PDS. Both the PDS and TMD are available on the Stake website, or on request from K2.
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