A managed fund is a type of investment that allows different investors to pool their money together and have it managed by a professional fund manager. The money may be invested across a range of assets, including shares, bonds, and property, with the aim of achieving a return through either capital growth or income.
By investing in managed funds, investors can share in the potential returns from a diversified portfolio without having to directly manage their money themselves. The fund manager is responsible for the day-to-day operations and making all investment decisions based on the fund’s objective and strategy.
Australian Secure Capital Fund operates three pooled mortgage funds, each tailored to a different type of investor. All funds are used to invest in short-term loans secured by registered mortgages over Australian property. Investments are spread across the entire pool of loans contained in each fund and not lent to a particular borrower or an individual security property.
How do Managed Funds work?
Managed funds pool together money from different investors and this combined capital is then invested in a range of assets by the fund manager. Investors do not own the underlying investments but instead buy “units” in the fund. The number of units you own depends on the unit price when you invest. For example, a managed fund investment of $5,000 at a unit price of $1 gets you 5,000 units.
The unit price, or value of each unit, is re-calculated as the market value of the underlying assets in the fund changes. ASCF calculates the unit price for each of its funds weekly and this published on our website each Tuesday. Since inception the unit price of each unit in each of our funds has remained stable at $1 per unit. You can earn a return on your investment when the unit price increases (known as capital growth) while managed funds can also pay income or distributions according to a specific schedule. You may have the option of receiving cash or reinvesting your income for more units in the fund.
Each managed fund has its own investment strategy. This determines which assets the fund invests in, the level of risk to investors, the expected returns, and the costs of managing the fund. The investment fund manager will use their expertise to decide where to invest the combined capital according to the strategy. They will also monitor the performance of the investments and make changes as needed.
Managed funds are either listed or unlisted. Unlisted managed funds are the most common type of Australian managed investment funds. The price of units is set by the fund manager and not on a traded market. To purchase or sell units in an unlisted managed fund, you must deal directly with the fund manager. Listed managed funds trade on the share market. These funds are typically not actively managed and investors can buy and sell units through a finance broker. ASCF operates unlisted mortgage funds only with all income dispersed to investors at the end of each month.
Benefits of investing in a Managed Fund
Managed funds give investors access to the financial expertise of a fund investment manager, who makes all decisions on their behalf. This can be especially helpful for those who do not have the time or knowledge to manage their own investments. For example, a managed fund investing in shares may be overseen by a professional stock market analyst. This specialist investment fund management gives investors peace of mind knowing that their money is in good hands.
Diversification is another key benefit of managed funds. By pooling funds, investors can take advantage of a wide range of investment opportunities which can be difficult to access on your own. Managed fund investments are typically spread across different asset classes, market sectors and even geographic regions. A diversified investment portfolio can help to reduce risk and improve returns over the long term because your investment isn’t not tied to a particular asset or security.
There are also some risks associated with managed funds. You have no control over investment decisions and may not know the exact makeup of the fund’s portfolio. The markets may go against the managed fund, which could lead to losses. Some managed funds may also carry additional risks based on the type of assets they invest in. You should carefully examine the investment strategy, asset allocation and the fund’s past performance to decide if a managed investment fund is right for you. The directors of ASCF have over 80 years of experience in banking and property, with all funds invested in diversified mortgages both geographically and property type. To view a detailed summary of our mortgage investments, please click here.
How to compare Managed Funds
Managed investment schemes can provide a great opportunity to grow your money, but every fund has different strategies, risks and fees involved which also means varying investment returns. It’s important to understand how to compare managed investment funds so you can choose one that meets your needs.
Here are some of the most important things to consider before you invest in a managed fund:
Risk Profile
The risk level of a managed fund depends on the asset classes the fund invests in. Investments such as cash or fixed interest are lower risk and aim to provide regular income and protect the capital invested. Growth investments like property or shares are higher risk, but offer a higher potential return. Choose an investment fund with a risk profile you’re comfortable with.
Investment Strategy
Make sure that the managed fund’s investment strategy aligns with your own objectives. Do you want to generate a fixed income or are you looking for long-term capital growth with your managed investments? Every fund will have a different strategy so you need to find one that fits your financial goals, investing time frame, and risk tolerance.
Management Fees
Managed funds charge a range of different fees to manage your money which can have an impact on your investment return. These may include establishment fees, contribution fees, and withdrawal fees. Be sure to examine all the fees and costs involved so you know exactly how much you’ll be paying.
Long-term Performance
Look at the fund’s performance over the past 3 to 5 years before making an investment decision. If a managed fund provides strong returns in one year, there’s still no guarantee it will be the same the following year. Long-term results are a better guide for future performance when it comes to reaching your financial goals.
Withdrawal Process
Managed funds can have restrictions on when you are allowed to withdraw your money, such as a minimum investment term. You may also have to pay exit fees to close your account along with other expenses like capital gains tax. It is important to have a clear investment timeframe and exit strategy when choosing which managed funds to invest in.
Product Disclosure Statement & Target Market Determinations
It is essential to review each fund’s product disclosure statement (PDS) and target market determination (TMD) when deciding where to invest your money. These documents contain all the information you need to know about the mortgage fund which helps you to compare different funds. This includes what assets the fund invests in, the fees, the risks of investing in the fund, the benchmark or target return, and what to do if you have a problem.
To view ASCF’s product disclosure statement (PDS) and target market determination (TMD) click here.
How to invest in Managed Funds
Once you have set out your financial goals, how long you plan to invest, and what risks you’re comfortable with, investing with Australian Secure Capital Fund is easy. We operate three different managed, pooled mortgage funds, each with its own unique balance of risk and return so you can choose the fund that best suits you.
Our mortgage investments pay targeted distribution rates of 6.10% to 7.75%* per annum, depending on your choice of fund and investment term. To get started, you can apply online or download and complete the New Investor Application Form.
