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Choosing a managed fund

Picking a professional to manage your money

Page reading time: 8 minutes

When you invest in a managed fund, your money is pooled together with other investors. A fund manager then buys and sells assets, such as shares or bonds, on your behalf.

You don't own the underlying investments, you own 'units' in the fund. The value of the units in the fund will rise and fall with the value of the underlying assets. Some managed funds also pay income or 'distributions'.

We explain the types of managed funds you can invest in and what to look for to find the best managed fund for you.

Choose the type of managed fund

There are thousands of managed funds to choose from. It's important to understand the different types of funds, the risks and returns so you can choose a fund that meets your needs.

Single asset managed funds

These managed funds invest in a single assets class, such as shares, property or bonds. Here are the main single asset managed funds you can invest in:

Type of fund

What they invest in

Cash funds

Invests in very low-risk, short-term investments. These can include short-term money market deposits, short-term government bonds and bank bills.

Fixed interest or bond funds

Generally invest in low-risk investments. These can include government bonds, bank bills, or mortgage-backed securities.

Some funds invest in corporate bonds and can be higher risk.

Mortgage funds

Invests in property loans (mortgages). Some funds are high risk. The fund's risk depends on the quality of the borrowers and purpose of the loan.

You receive income as long as the borrower pays interest. Your investment doesn't increase in value. It can fall in value if borrowers can't repay their loans.

Property funds

Invests in residential property, commercial property or property developments. Some property funds are be high risk. You might not be able to withdraw your money from the fund at short notice. You're not guaranteed a fixed rate of interest or return.

Share (equity) funds

Invests in listed companies in Australia, overseas or both. These funds offer the potential for higher returns but also have higher risk.

Alternative investment funds

These include hedge funds and funds that invest in private equity, derivatives and commodities. They can be high risk. You should seek financial advice before you invest.

Mixed asset or multi-sector managed funds

These funds invest in a range of investments. They're labelled based on the types of investments that make up the majority of the fund portfolio.

Investment mix

Typical characteristics

Growth

Around 85% in shares and property
The rest in cash or fixed interest

Around 85% of funds invested in shares and property and 15% in cash or fixed interest

Investment: $10,000 after 10 years = $17,100 (before fees and tax)

Expected return*: 5.5%
(gross returns before fees and tax)

Risk (volatility): High

Expect a loss: 5 years in 20

Balanced

Around 70% in shares and property
The rest in cash or fixed interest

Around 70% of funds invested in shares and property and 30% in cash or fixed interest

Investment: $10,000 after 10 years = $16,600 (before fees and tax)

Expected return*: 5.2%
(gross returns before fees and taxes)

Risk (volatility): High

Expect a loss: 4-5 years in 20

Conservative

Around 30% in shares and property
The rest in cash or fixed interest

Around 30% of funds invested in shares and property and 70% in cash or fixed interest

Investment: $10,000 after 10 years = $15,400

Expected return*: 4.4%
(gross returns before fees and taxes)

Risk (volatility): Medium

Expect a loss: 2 years in 20

Cash

100% in cash or cash-equivalents. This includes short-term money market deposits, government bonds and bank bills

100% of funds invested in cash and cash equivalents

Investment: $10,000 after 10 years = $13,600 (before fees and tax)

Expected return*: 3.1%
(gross returns before fees and taxes)

Volatility: Very low

Expect a loss: 0 years in 20

* These investment returns are based on professional advice received in May 2019. Past performance of a fund is not a reliable indicator of future performance. Returns can vary a lot from year to year. They can be negative in some years, especially where money is invested in higher risk assets, like shares and property.

Compare managed funds

Check the PDS

A product disclosure statement (PDS) contains all the information you need to know about a fund and to compare funds. It includes information on:

Look at long-term returns

If a fund performs well in one year, there's no guarantee it will the next year. A fund's performance over 5 to 10 years gives you a better indication of how it will perform in the future.

You should compare the returns of a managed fund or portfolio offered in a managed account against:

You can check how a managed fund has performed through:

A managed fund's PDS will tell you the minimum amount of time you should invest for and risk level of the fund. Make sure this lines up with how long you're planning to invest and your risk tolerance.

Review the risks

Each managed fund has a different risks based on the assets they invest in. Risk is the likelihood that you'll lose some or all the money you've invested.

You can find information on the risks of investing in a managed fund in the PDS. Some risks to look out for when investing a managed fund are:

For more information see understanding investment risk.

Check the managed fund fees

Managed funds charge a range of fees for managing your money. Small differences in fees can have a large impact on your returns.

These are the common fees you should check before you invest.

The scheme may also charge you fees for transactions, withdrawals, to change investment options or exit the scheme.

Fees reduce the returns of a managed fund. They can also increase in the size of losses as they are charged regardless of whether the fund makes a profit or a loss.

You may be able to negotiate the fees you pay with fund manager or your adviser.

Buying units in a managed fund

When you invest in a managed fund you are buying 'units' in the fund. The number of units you get depends on the unit price at the time you invest.

The unit price changes depending on the value of the assets the fund invests in. With most managed funds, you'll need a minimum amount to invest, for example $5,000.

Unlisted and listed managed funds

Withdrawing your money from a managed fund

Managed funds can have fees or restrictions on when you can withdraw your money.

Some funds won't allow you to withdraw your money until a certain point in time. For example, 12 months after your investment.

Other funds may freeze or stop withdrawals to protect all the members’ investments. Stopping withdrawals until the market settles means the fund can avoid selling assets at lower values. Distributions such as income payments might continue from a frozen fund.

You can find information on withdrawal rights in the fund's PDS.

If you're having trouble withdrawing your money beyond the stated fund restrictions, you can complain.

Hardship withdrawals from frozen funds

If your money is in a frozen fund and you're finding it hard to pay your regular bills, you may be able to withdraw some, or all, of your money.

If your fund manager offers hardship withdrawals to all investors, you can apply for a hardship withdrawal if:

If you meet the hardship criteria, the fund manager may approve that you can:

Your fund manager will let you know whether a fund is frozen. Contact them to apply for a hardship withdrawal.

ASIC provides more information on frozen funds and hardship withdrawals.

Keep track of your managed fund's performance

By law, your fund manager must update you on the fund's performance at least once every 12 months.

Read the performance reports carefully to:

Find out more about how to keep track of your investments.