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.
Potential benefits
A managed fund pools investors’ money and provides exposure to a professionally managed portfolio. Depending on the fund, it may offer diversification, access to specialist markets and administrative convenience.
- Professional portfolio management
- Diversification across securities or markets
- Access to specialised asset classes
- Regular reporting and administration
Potential disadvantages
Fees reduce returns and can vary materially. Investors generally do not control individual transactions and may receive taxable distributions resulting from decisions made within the fund.
Some funds are concentrated, illiquid, geared or exposed to currency and manager risk. The Product Disclosure Statement should be read before investing.
The role within a portfolio
A managed fund should be assessed against its objective, strategy, underlying assets, risks, fees and the job it is expected to perform in the wider portfolio.
What is being delegated
The manager selects and maintains investments under the fund's mandate. Investors retain the decision about which fund to hold and how much of their portfolio it represents. Delegating the selection of individual securities does not remove the need to understand the fund's overall exposures.
A specialist fund may provide access to an area that would be difficult to manage directly, while a diversified fund can combine several asset classes. These serve different purposes. The number of holdings is less informative without knowing how those holdings are distributed and what common risks they share.
How access to money works
Unlisted funds generally process applications and withdrawals through the fund or an investment platform. The time required depends on the product's terms and the liquidity of its assets. Exchange-traded funds are bought and sold on an exchange, where the trading price can differ from the value of the underlying portfolio.
Distributions and changes in unit value are both parts of the investment result. A distribution is not necessarily additional profit on top of the reported total return. Understanding how the product reports income, capital movement and expenses makes comparisons more useful and avoids counting the same return twice.