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Managed funds, as the name suggests, are an investment structure where professional fund managers select and manage the fund’s investments on behalf of their investors.
Managed funds have long appealed to investors who may not have the time or the expertise to invest in certain asset classes on their own behalf. And as investors pool their money, managed funds also give them access to a wider range of assets and asset classes than they would otherwise have access to. When you invest in a managed fund the number of ‘units’ you receive will depend on the unit price on the day of purchase. Units are of equal value and their price will reflect the value of the fund’s assets which may change daily.
Traditionally, managed funds were ‘unlisted’ which meant units could only be purchased by applying to the fund. These days, many are listed on the ASX mFunds service so units can be bought and sold through a broker. (ASX mFunds are not to be confused with exchange-traded funds (ETFs), although many fund managers also offer ETFs.)
Investment returns come in the form of capital growth in the value of your units and income from distributions. While distributions may be declared on a regular basis, they ultimately depend on the performance of the fund and its earnings.
Importantly, fund managers will deduct management and often performance-based fees from fund earnings before distributing income.
Today there are thousands of managed funds in Australia, with $4,390.3 billion in assets according to the latest ABS statistics. These are held by a range of investors, including super funds, insurance companies and retail investors. The size and maturity of the managed funds industry means there is a wide variety of investment strategies on offer.
Some managed funds invest in a single asset class such as shares or fixed interest, a geographical area such as Asia, or emerging markets. Others focus on a strategy such as high yield shares or theme such as sustainability. So-called multi-sector funds invest across multiple asset classes.
Some fund managers actively select and trade investments in an attempt to beat the market, while absolute return funds aim to not just beat the market but make positive returns every year. Passive funds aim to track a particular market or market index. Generally, the higher the degree of active management the higher the fees.
How are SMSFs using managed funds?
It is often claimed that SMSFs are not as diversified as large super funds, with too much focus on Australian shares and cash and not enough exposure to international markets. However, that view fails to take into account indirect investment by SMSFs via managed funds.
At first glance, the latest figures from BGL as of 30 June 2022 show just 6.6% of SMSFs hold direct international shares. But dig a little deeper and 11% of SMSFs hold investments in traditional managed funds. What’s more, half of the 20 most popular managed funds invest in global shares or bonds (as are more than half the most popular ETFs).
The 20 most popular managed funds invested in by SMSFs
The top 20 list of managed funds is ranked by the percentage of SMSFs that hold these managed funds, rather than the value of assets that SMSFs have invested in the funds, although both figures are provided in our table.
You will notice three Orca funds at the top of the list. These funds were added to the managed funds list in January 2021 after a company restructure. Previously they were ASX-listed trusts under the Evans & Partners name.
Otherwise, the top 20 list is dominated by Magellan and Platinum international equity funds. (It should be noted that the latest list pre-dates Magellan’s management instability and an outflow of investors from its managed funds and ETFs.)
Australian equity funds are also popular, from fund managers such as Macquarie, Fidelity, Bennelong and Perpetual.
Investors are also using managed funds to gain exposure to other assets like global bonds, infrastructure and listed property via big names such as PIMCO (global bonds, diversified fixed interest), Magellan (infrastructure) and Australian Unity, APN and AMP (property trusts). New to the top 20, Ardea Real Outcome Fund invests in local and overseas bonds.
20 most popular managed funds invested in by SMSFs
|Rank||Security code||Fund name||% of SMSFs with managed funds that hold this security||% of total SMSF managed fund investments*|
|1||PIM4432AU||Orca Global Disruption Fund**||17.5%||0.6%|
|2||PIM8122AU||Orca Global Fund**||13.8%||1.4%|
|3||PIMM9684AU||Orca Asia Fund**||12.7%||0.4%|
|4||PLA0002AU||Platinum International Fund||7.7%||1.6%|
|5||MGE0001AU||Magellan Global Fund||6.1%||2.1%|
|6||PLA0004AU||Platinum Asia Fund||4.8%||1.4%|
|7||MAQ0277AU||Macquarie Income Opp Fund||3.0%||0.4%|
|8||AUS0112AU||Aust Unity Hcare Prop Trust Wsale Un||2.8%||1.2%|
|9||MGE002AU||Magellan Infrastrure Fund||2.4%||0.5%|
|10||ETL0016AU||PIMCO Div Fixed Int Fd – Ws Class||2.4%||0.3%|
|11||ETL0018AU||PIMCO Global Bond Fd – Ws Class||2.4%||0.1%|
|12||HOW0098AU||Ardea Real Outcome Fund||2.3%||0.1%|
|13||BFL0004AU||Bennelong Ex-20 Aust Equities Fd||2.3%||0.5%|
|14||PLA005AU||Platinum International Healthcare||2.0%||0.2%|
|15||FID008AU||Fidelity Australia Equities Fund||1.9%||0.9%|
|16||PLA0100AU||Platinum International Brands Fund||1.9%||0.4%|
|17||APN0008AU||APN AREIT Fund||1.9%||0.5%|
|18||MAQ0410AU||Walter Scott Glob Equity Fund||1.8%||0.5%|
|19||PER0260AU||Perpetual’s Wsale Div Income Fund||1.7%||0.1%|
|20||NML0001AU||AMP Capital Wsale Aust Prop Fd||1.7%||0.3%|
Source: BGL (bglcorp.com.au). Data as of 30 June 2021
*Percentage each managed fund makes up of the total SMSF managed fund investments e.g. Platinum International Fund has 1.6% of the total SMSF investments in managed funds.
** The three Orca funds were added to the managed funds list in January 2021 after a company restructure. Previously they were listed on the ASX as Evans & Partners listed trusts.