Managed Funds Background

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If you’re considering investing in a managed fund, you might consider the winners of Canstar’s Managed Funds Star Ratings and Awards.

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What are managed funds?

A managed fund is an investment where your money is pooled together with other investors in a fund with a common goal. They are usually overseen by the fund manager who holds and controls the money on your behalf.

Managed funds are either listed (traded on the share market) or unlisted (bought and sold directly through the fund manager).

Listed funds are valued daily according to their price on the relevant stock exchange, whereas unlisted funds are usually valued less frequently based on the value of the underlying assets held by the fund.

A managed fund can be invested in a number of areas on your behalf, such as in cash, shares, bonds, listed property trusts or some other security.

It’s important to note that when you invest in a managed fund, you don’t own any of the underlying investments. The Australian Government’s Moneysmart website says you only own units in the fund, which you can buy or sell similar to shares.

The value of the units may rise and fall with the value of the underlying assets in the managed fund. Some managed funds also pay income or ‘distributions’, similar to a company paying dividends to shareholders.

How much does it cost to invest in a managed fund?

Managed funds may charge a number of fees, such as for ongoing management or administration costs, performance fees if the fund performs above a set benchmark, or other fees involved when you buy or sell units in a fund.

The fees may vary between individual managed funds and providers. If you are considering investing in a managed fund it’s important to check the product disclosure statement (PDS) or other documentation to see what fees are charged.

Moneysmart points out that small differences in fees can have a big impact on the returns from a managed fund.

What are the pros and cons of investing in a managed fund?

A managed fund can give you access to a range of companies or investments in a particular area that may be of interest to you.

It could be a managed fund that is actively managed by a manager or team who make ongoing decisions about a fund’s investments, or one that is passively managed that follows a particular market index.

For example, you may want to invest in a managed fund that invests in some of the larger Australian companies by market capitalisation listed on the ASX, or you may want to look at just emerging companies, tech stocks or companies with a strong ethical commitment.

You may opt for a managed fund that invests in cash securities, property trusts, fixed interest investments, agriculture or agribusiness schemes, mortgage schemes or some other sector.

Or you may want to look at a managed fund that invests in overseas markets, or consider a fund that combines a range of options with a mixed and diverse portfolio.

The point being there are many different options available to you at many different levels of risk, from conservative to balanced, growth or high growth. If you are considering investing in a managed fund you need to find one that suits your needs and risk appetite.

Remember, when looking at a managed fund’s performance, past performance is no guarantee on future performance. The value of units in a fund can rise or fall, depending on what happens to the underlying assets.

Moneysmart says you could lose some or all of the money you invest in a managed fund.

You should check what minimum or ongoing investment rules apply, and any fees and restrictions if you wish to sell your units and withdraw your money from a managed fund.

If you are considering investing in a managed fund you may wish to consider seeking some independent professional advice before making any decision.

How do Canstar’s Managed Funds Star Ratings and Awards work?

Canstar’s Managed Funds Awards recognise providers that perform well across a variety of different asset classes and profiles for managed funds, as well as individual awards for providers that offer outstanding value across Multi-Sector Funds and Australian Equities.

Our Managed Fund Star Ratings highlight a shortlist of products from our database that have been assessed and ranked, with the top 10% of funds receiving a 5-Star Rating and an Award in recognition of their performance.

Our Managed Funds Provider of the Year Awards recognise institutions whose products offer a strong combination of performance and features across a variety of asset classes and investor types

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This content was reviewed by Editor-in-Chief Nina Rinella as part of our fact-checking process.

Important information

For those that love the detail

This advice is general and has not taken into account your objectives, financial situation or needs. Consider whether this advice is right for you.

Canstar does not rate or compare every provider in the market and we may not compare all features relevant to you. Learn more about our Managed Funds Methodology. Star Ratings are only one factor to take into account when considering products. Check current product details and investment options with the product issuer. Past performance should not be relied upon as an indicator of future performance; unit prices and the value of your investment may fall as well as rise. In some circumstances, trading can be suspended and in that event, unitholders will not be able to buy or sell units in that fund.

Any advice on this page is general and has not taken into account your objectives, financial situation or needs. Consider whether this general financial advice is right for your personal circumstances. You may need financial advice from a qualified adviser. Canstar is not providing a recommendation for your individual circumstances. It’s important you check product information directly with the provider. Consider the Product Disclosure Statement and Target Market Determination (TMD), before making a purchase decision. Contact the product issuer directly for a copy of the TMD. For more information, read our Detailed Disclosure.

What is a Target Market Determination?

A Target Market Determination (‘TMD’) is a document that explains which people particular financial products may be suitable for (the target market) and sets out any conditions around how financial products can be distributed to consumers.

Why do product issuers provide Target Market Determinations?

From 5 October 2021, TMDs are compulsory for most financial products.

Issuers and distributors of financial products must take reasonable steps that are likely to result in financial products reaching consumers in the target market defined by the product issuer.

We recommend that you consider the TMD before making a purchase decision. Contact the product issuer directly for a copy of the TMD.

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