7 minute read
The fundamentals of managed funds
What is a managed fund?
A managed fund is a professionally managed investment portfolio. In a managed fund, the investments of individual investors are pooled together with other customers, or unit holders. Professional investment managers then invest the pooled money, often across a range of assets classes which are permitted by that fund. When you invest in a managed fund you purchase units in the fund rather than the assets directly. The number of units you own in a managed fund depends on the amount of money you invest and the value of each individual unit at the time of purchase. The unit price will fluctuate along with the market and the investments of the fund itself.
Why choose managed funds over other investments?
1. You can get started with a small amount
We have a range of funds that require as little as $1,000 to invest.
2. Diversification
Managed funds can hold a variety of investment types within the fund. These investments can be diversified across countries, asset classes (e.g. shares, property, fixed interest i.e. bonds, cash), industries and companies. This way, you are automatically diversifying your investment. A diverse portfolio can reduce the impact of volatility in an investment’s market value.
3. Access to a broad range of investments you otherwise may not have access to
You gain access to markets and strategies that rely on larger scale buying power and access to a variety of investment types that you may not have been able to invest in as an individual. For example, access to investments in foreign markets, or institutional type investments.
4. Having experienced investment managers looking after your money
Fund managers are experienced and qualified professionals who specialise in the selection and maintenance of investments and ensure the investments stay within the strategy of the fund.
Sandhurst Trustees has extensive expertise within our funds management team. Combined with the latest analytical tools and market information we can make informed and timely decisions to manage the fund for our unit holders.
5. Opportunity to make regular contributions to your investment
Most of our funds offer the convenience of a regular savings plan so you can add to your investment on a regular basis. By purchasing additional units with a regular savings plan, you could end up paying less per unit over time. This means your regular contribution buys fewer units when prices are high, and more units when prices are low helping to smooth out market fluctuations over time. This is called 'dollar cost averaging'.
6. Benefits of compounding
In addition to a regular savings plan, reinvesting any income earned back into your principal investment will compound the returns on your investment. This can lead to a higher investment balance on which to earn more income in the future.
7. Simplified tax reporting
We provide a tax statement at the end of each financial year to provide to your accountant or include in your tax return.
How does unit pricing work?
The number of units you own in a managed fund depends on the amount of money you invest and the value of each individual unit at the time of purchase.
For example, if a unit is priced at $1.00 today and you invest $10,000, you will receive 10,000 units. If the value of the assets within the managed fund increase, the unit price increases and vice versa. These fluctuations can occur daily.
If a distribution is paid, you will either receive cash based on your unit balance or more units in the fund if you have chosen the reinvestment option.
What are some of the fees associated with managed funds?
There are a range of fees associated with managed funds. So, it’s important to be aware of some of the costs before investing. The two main expenses involved with managed funds include:
- Management fee: Pays for your investment to be professionally managed and is usually a percentage of the funds value.
- Performance fee: This is an additional fee that a fund manager may charge if a fund outperforms a benchmark level.
Some fund managers may also charge termination fees, switching fees, or allow an adviser service fee to be deducted from investments to pay a financial adviser as requested by you. The types of fees charged can be found in the fund’s Product Disclosure Statements (PDS) and it’s important to know what fees may be involved with your investment.
How do I keep track of the funds' performance?
Each fund produces a performance report so you can stay up to date with the latest fund performance.
Annual reports can be accessed online or by calling the Sandhurst Trustees Limited Funds Administration Team (STL Registry) on 1800 634 969. Updated daily, the most recent managed funds unit prices are available too.
How do I get started?
It’s easy to start investing and it can be done with as little as $1,000.
Firstly, we suggest reading the relevant PDS. You can then complete an online application form for your preferred choice of fund. And if you require general advice, the Wealth Concierge Team are available to assist you. Simply submit an enquiry and we’ll be in touch, free of charge.
So, if you’re feeling ready, check out our range of managed funds.
For more helpful articles, visit our Education HUB today.
Commonly used terms
Annual report
A yearly report or statement of a company's financial health. It generally includes a balance sheet and profit and loss statement. Trustees of funds must issue annual reports each year.
Asset allocation
The percentage of assets held in each asset class (shares, fixed interest, etc.) in an investment portfolio.
Asset class
A category of financial assets. The major asset classes are shares, property, fixed interest and cash, which in turn can be broken down further to include domestic or international shares, domestic or international fixed interest, direct or indirect property.
Capital
The value of your investment represented by the total assets (what you own) less total liabilities (debts or monies owed). Also refers to the initial amount you invested.
Distribution
Where you buy units in a Fund before a distribution date, the application price will include income accumulated in the Fund since the last income distribution was made. This income will subsequently be distributed and will form part of your taxable income.
Indirect Cost Ratio (ICR)
A useful measure of the ongoing fees and costs you can expect to pay if you invest in the Funds. It is the total of Management Costs (that is, ongoing fees and costs) of each Fund during a financial year represented as a percentage. It is not deducted directly from an Investor.
Management Fee
The total fees and costs incurred in managing the Funds and your investment. They include costs such as Investment Management fees, Responsible Entity fees, administration expenses and other expenses. Management Costs are deducted from the Fund assets as a whole.
Net asset value
The total assets of a Fund less the total liabilities of the Fund, calculated in accordance with the Fund’s Constitution.
Trustee
The person or company that has the legal responsibility to ensure that the trust or superannuation fund is operated in accordance with the trust deed.
Unit price
Most managed funds are unit trusts. When customers invest, their money buys units in the trust. How many units they receive depends on how much they invest and the unit price at the time of the purchase. An investor's unit balance in a fund will remain constant unless they transact on their account (e.g. reinvest distributions, withdraw etc.). The unit price will change according to changes in the market value of the underlying investments, or the total number of units issued for the Fund.
Daily unit prices are available over the phone or online.
Customers can check the value of their investment at any time by multiplying the number of units they hold by the daily withdrawal price.
A Wealth specialist can help guide you. Make an enquiry today.
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Things you should know
Sandhurst Trustees
Sandhurst Trustees Limited ABN 16 004 030 737 AFSL 237906 (Sandhurst) is a wholly owned subsidiary of Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL 237879. Sandhurst is the responsible entity and issuer of the managed funds available on this website. Additionally, Sandhurst is the issuer of commercial lending products and the provider of traditional trustee services available on this website. Each of these companies receives remuneration on the issue of the product or service they provide. Investments in these products are not deposits with, guaranteed by, or liabilities of Bendigo and Adelaide Bank nor any of its related entities, and are subject to normal investment risk, including possible delays in repayment and loss of income and capital invested.
Information on the website is jointly prepared by Sandhurst and Bendigo and Adelaide Bank and subject to change without notice. Advice in relation to managed funds and commercial lending products is provided by Sandhurst. The information contains general advice only and does not take into account your personal objectives, situation or needs. Before making an investment decision in relation to these products you should consider your situation and read the relevant Product Disclosure Statement available on this site.
The information is given in good faith and has been derived from sources believed to be accurate at its issue date. Neither Sandhurst nor the Bendigo and Adelaide Bank give any warranty for the reliability or accuracy or accept any responsibility arising in any way, including by reason of negligence for errors or omissions for the information contained on this website. Neither Sandhurst nor the Bendigo and Adelaide Bank has an obligation to update, modify or amend this website or notify you in the event that a matter of opinion or projection stated changes or subsequently becomes inaccurate.
Neither Sandhurst nor Bendigo and Adelaide Bank is responsible for the content of any other site accessed via this site. That information is the responsibility of the site owner. Links to other sites are provided for convenience only and do not represent any endorsement by Sandhurst or the Bendigo and Adelaide Bank of the products and services offered by the site owner.
