This guide explains general concepts for educational purposes. It is not financial, tax or legal advice, or a recommendation to buy, sell, hold or change a financial product or strategy. It does not take into account your objectives, financial situation or needs. Rules, caps, thresholds and product terms can change. Check the current official information and obtain advice appropriate to your circumstances before making a financial decision.
How the structure works
A managed fund pools money from multiple investors. Investors receive units, and the unit price reflects their proportional interest in the value of the fund’s assets, less liabilities.
The investment manager follows the fund’s stated strategy and makes decisions about the underlying portfolio.
Returns may come from income and capital movement
Investors may receive distributions and the unit price may rise or fall. Neither income nor capital growth is guaranteed, and investors can receive less than they invested.
Understanding the fund mandate
Consider the fund’s objective, asset exposures, diversification, liquidity, fees, manager, risk level and tax implications. Past performance alone does not show whether a fund suits your goals.
Units represent a share of the pool
Buying units gives the investor an interest in a pooled portfolio rather than direct ownership of each underlying security in their own name. The fund's assets can include one asset class or a combination, depending on its mandate. Applications and withdrawals affect the number of units held, while investment movements affect their value.
The manager's mandate defines what the portfolio can invest in. A fund described as Australian shares therefore has a different task from one investing across global shares, bonds and cash. A product name alone does not explain its complete investment strategy.
Distributions and reporting
A fund may distribute income and realised gains to investors. Depending on the product, distributions can be paid out or reinvested to buy additional units. Reinvestment increases the holding but does not necessarily remove the investor's tax-reporting obligations.
Statements record holdings, transactions and distribution information. Tax statements provide the categories needed for the relevant tax return. A unit-price movement, a cash distribution and a taxable amount may differ because each measures a different part of the investment. Total return brings income and capital movement together when assessing performance.