Unlisted Managed Funds

For many Australian investors who seek high-yielding returns on their investments, the answer may not be traditional shares or lower-yielding cash assets, but rather, unlisted managed funds. Australia-wide, thousands of people—from early-career wealth accumulators to retirees—are choosing these increasingly popular investment vehicles due to their expert oversight, diversification, and focus on consistent performance throughout various market conditions.

This blog goes in-depth on the key differences between unlisted managed funds and other traditional investment options, outlining some of the main types of unlisted investments that everyday Australians use to achieve their financial goals.

Unlisted Managed Funds: Definition and Key Principles

In an unlisted investment vehicle, such as an unlisted mortgage fund, multiple investors pool their money and rely on professional fund managers to make strategic investment decisions. In this structure, the fund provides capital used to originate property-secured loans. Importantly, the legal title of the property remains in the name of the borrower, while the fund holds a registered mortgage over the asset as security for the investment.

Unlisted managed funds are valued by their net asset value (NAV) rather than daily market movements, allowing a steadier approach to long-term investing. Unlike listed managed funds traded on the Australian Securities Exchange (ASX), unlisted managed funds are not subject to daily trading volatility. This can allow managers to prioritise capital preservation and targeted returns across a diverse range of asset classes, including property, private equity, infrastructure, and mortgage-backed loans.

The process from the initial investment is generally as follows:

Investors Buy Units: The process begins when an investor completes an application form to purchase a stake in the fund. This stake is represented by ‘units’ or ‘shares’, depending on the fund’s specific legal structure. A unit trust is the most common structure.
Capital is Pooled: The money from all individual investors, alongside contributions from other investors, is combined or ‘pooled’ into a larger fund, creating significant capacity to acquire substantial assets that would typically be out of reach for a single investor.
The Fund Manager Invests: This pooled capital is strategically deployed according to the fund’s specific investment strategies. For example, mortgage funds like ASCF use the capital to provide property-backed loans.
Targeted Returns are Generated: The fund’s assets generate targeted returns. For mortgage funds, this is the interest paid by borrowers. These returns contribute to the fund’s overall value.
Distributions are Paid: The income generated by the fund’s assets is distributed to investors. These distributions are calculated before the deduction of management fees, performance fees, and other fund-related expenses. The amount each investor receives is proportional to the number of units they hold.

Important Disclosure: Investors should be aware that there is a risk that there may be a reduction or cessation of distributions (returns) and that returns are not guaranteed.

Listed vs. Unlisted Managed Funds

When deciding between listed and unlisted managed funds, liquidity, volatility, and valuation methods can differ markedly. Here are some key differences to be aware of:

Listed Managed Funds

Listed managed funds include Exchange Traded Funds (ETFs) and Australian Real Estate Investment Trusts (A-REITs), which are publicly traded on a stock exchange like the ASX.

Investors can buy and sell units in these funds throughout the trading day, just like any other company shares. This provides high liquidity, meaning investors can generally convert their investment back into cash relatively quickly. However, this also means their value is subject to daily market sentiment. The market price of a listed fund can fluctuate significantly and may trade at a premium or discount to the overall value of its underlying assets.

Unlike listed funds, unlisted managed funds in Australia are not traded on a public exchange. Instead, investors buy units directly from the fund manager and can only redeem them by selling them back to the manager, subject to the fund’s specific withdrawal conditions.

This structure means unlisted investments are inherently less liquid. You cannot always sell your units at short notice, and redemption windows may be monthly, quarterly, or even longer. However, this illiquidity means the fund is insulated from daily market noise. The unit price of an unlisted managed fund is based on the value of underlying assets as determined in accordance with the fund’s valuation policy. This insulates the fund from the daily volatility and market sentiment that drives the stock exchange, typically leading to a smoother and less volatile valuation cycle.

Feature	Listed Managed Funds	Unlisted Managed Funds
Trading	Traded on a public exchange (e.g., ASX)	Units bought and sold directly with the fund manager
Liquidity	High; can be bought and sold throughout the trading day	Low; withdrawals are subject to fund rules and notice periods
Pricing	Market price is determined by supply and demand; it can differ from NAV	Unit price is based on the NAV of the fund’s assets
Volatility	Higher; subject to daily market sentiment and fluctuations	Lower; insulated from daily market volatility
Access	Easily accessible through any stockbroker	Accessed directly via the fund manager through an application form

The Role of a Professional Fund Manager

The success of any managed investment, particularly unlisted funds, is heavily reliant on the expertise of its professional fund manager(s). Put simply, their role is to execute the fund’s investment strategies and make all the key investment decisions on behalf of investors. This is especially critical in markets like private equity or specialised property debt, where deep industry knowledge is essential.

A diligent fund manager is typically responsible for:

Sourcing and Due Diligence: Conducting thorough research to identify and vet potential assets, whether it’s a commercial property, a private company, or a loan opportunity.
Portfolio Construction: Building and managing a portfolio that aligns with the fund’s stated objectives, whether that is seeking capital growth or generating targeted returns. This includes managing the diversification benefits across different asset classes.
Risk Management: Actively monitoring the fund’s assets and the broader market to manage risks, protect investor capital, and ensure consistent future results.
Exit Strategy Verification: Ensuring every short-term loan is anchored by a clear, realistic, and verifiable exit strategy—such as the impending sale of the property or a refinance—to facilitate the timely repayment of the underlying loan.
Administration and Reporting: Handling all operational aspects, from collecting returns to managing liquidity and providing regular performance updates to investors.

Different Types of Unlisted Managed Investment Schemes

Unlisted managed funds in Australia cover a wide array of investment options, often focusing on a single asset class or a mix of assets. Some of the different types of unlisted managed investment schemes include:

Unlisted Mortgage Funds

As a specialised unlisted fund focused on the property and finance sectors, mortgage funds do not own property directly. Instead, the fund invests in a portfolio of property-backed loans structured as a mortgage trust, earning returns from the interest paid by borrowers. ASCF’s funds are a prime example of this structure.

Unlisted Property Funds

Unlisted property funds Australia-wide enable investors to gain exposure to large-scale real estate, such as commercial offices, retail centres, or industrial properties. They can provide both rental income and the potential for capital growth.

Bond Funds

These are typically focused on generating regular income. For example, bond funds generally invest in government and corporate debt to provide a steady stream of fixed interest payments.

Private Equity Funds

These unlisted funds invest in private companies that are not listed on a stock exchange, often targeting high-growth opportunities.

Benefits of Investing in Unlisted Funds

For investors with an appropriate risk tolerance, unlisted funds in Australia can offer several compelling advantages, such as:

Access to a Wider Range of Assets: Unlisted investments can open the door to opportunities that are simply not available on public markets, from landmark commercial properties to specialised credit markets.
Reduced Volatility: By avoiding the daily fluctuations of the stock exchange, unlisted managed funds can generally offer a less volatile valuation path over time, which can be appealing for long-term returns.
Potential for Higher Returns: Compared with traditional cash-style assets, unlisted assets can offer the potential for stronger, more consistent returns due to their illiquid nature and the specialised expertise required.
Professional Management: Investors often benefit from the expertise of professional fund managers who handle the complexities of sourcing, managing, and administering the underlying assets.

Practicalities for Australian Investors

Before making an investment decision, there are several practical elements to consider.

Understanding the Fee Structure

Most managed funds have fees to cover their operational costs. Common fees include ongoing management fees and performance fees, which are detailed in the fund’s disclosure documents. These fees will impact your final return.

The Product Disclosure Statement (PDS)

For any fund open to retail investors, the fund manager must provide a PDS. This is a critical document that outlines the fund’s investment strategies, risk level, fee structure, and withdrawal process. It is essential to read and understand this document in full.

Tax Implications

Generally, managed investment schemes distribute all of their income and net capital gains to investors each year. Individual investors are then taxed on their share of the distribution at their personal marginal tax rate. The tax treatment can be complex, so it is always recommended to consult a financial adviser or tax professional before investing.

Is an Unlisted Managed Fund Right for You?

Determining if an unlisted managed fund is a suitable investment requires a careful assessment of your personal circumstances. These funds may be appropriate for both retail and wholesale investors who align with the following profile:

Have a Medium-Term Horizon: You are comfortable investing your capital for a set period and understand the limitations around unlisted managed funds’ liquidity.
Have the Appropriate Risk Profile: While ASCF’s funds aim to prioritise capital preservation and stability, investors should be aware that higher risk investments may be involved to achieve competitive returns. The fund’s professional management aims to maintain risks at the same level relative to the fund’s stated objectives, providing greater predictability compared to listed alternatives.
Are Seeking Diversification or Specific Exposure: Your investment goals include gaining access to asset classes like direct commercial property or private equity that are not easily accessible on the stock exchange.

The ASCF Approach to Unlisted Managed Funds

At ASCF, our mortgage-backed investment funds leverage the potential of a diversified portfolio of property-secured loans. These funds aim to provide income-focused targeted returns while maintaining a disciplined approach to capital preservation. They are also actively managed by experienced lending professionals.

Structured as a pooled trust, the fund spreads investor capital across multiple loans, delivering diversification benefits and reducing exposure to any single borrower. This approach allows investors to access professionally managed, higher return opportunities in the property and finance sectors with the confidence that every investment decision is overseen by a dedicated team of experts.

Interested in learning more? Contact our team or get started with the application process today.

This article provides general financial product advice only. It is always recommended that you seek personal advice from a licensed financial adviser. They can assess your financial situation and objectives. Before making any further investment decisions, you must read the relevant Product Disclosure Statements (PDS) and Target Market Determination (TMD) documents in full.