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.
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 $3,816.9 billion in assets according to the latest ABS statistics. 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, geographical area such as Asia, or emerging markets, or using a strategy such as high yield shares or sustainability. So-called multi-sector funds invest across multiple asset classes.
Some fund managers actively select and trade investments in order 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 2020 show a paltry 2.8% of SMSFs hold direct international shares. But dig a little deeper, and over 17% of SMSF 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. As has been the case for some time, the top three spots are dominated by Magellan and Platinum international equity funds.
Australian equity funds are also popular, from fund managers such as Macquarie, Fidelity, Bennelong and Vanguard.
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 Vanguard (Australian property securities).
20 most popular managed funds invested in by SMSFs
|Rank||Security code||Fund name||% of Funds with Domestic Listed Securities that hold this security||% of total SMSF Domestic Listed Securities Investments*|
|1||PLA0002AU||Platinum International Fund||18.1%||2.7%|
|2||MGE0001AU||Magellan Global Fd||15.0%||3.2%|
|3||PLA0004AU||Platinum Asia Fund||7.7%||1.6%|
|4||ETL0018AU||PIMCO Global Bond Fd – Ws Class||6.1%||0.8%|
|5||MGE0002AU||Magellan Infrastructure Fd||5.7%||0.7%|
|6||MAQ0277AU||Macquarie Income Opp Fund||5.7%||0.8%|
|7||FID0008AU||Fidelity Aust Equities Fd||5.6%||0.9%|
|8||MAQ0410AU||Walter Scott Glob Equity Fund||5.3%||1.1%|
|9||VAN0004AU||Vanguard Aus Prop Secs Index Fd||4.8%||0.4%|
|10||ETL0016AU||PIMCO Div Fixed Int Fd – Ws Class||4.4%||0.8%|
|11||IOF0045AU||Antipodes Global Fund – Class P||4.3%||0.6%|
|12||MIA0001AU||MFS Global Equity Trust||4.0%||0.6%|
|13||BFL0004AU||Bennelong Ex-20 Aust Equities Fd||3.8%||0.5%|
|14||VAN0003AU||Vanguard International Shares Index||3.8%||1.3%|
|15||VAN0002AU||Vanguard Australian Shares Index||3.6%||1.9%|
|16||HOW0052AU||Kapstream Absolute Return Income Fd||3.4%||0.4%|
|17||IOF0145AU||Janus Henderson Tactical Income||3.2%||0.5%|
|18||MAQ0482AU||Winton Global Alpha Fd||3.1%||0.2%|
|19||CSA0038AU||Bentham Global Income Fund||2.8%||0.3%|
|20||APN0008AU||APN AREIT Fund||2.8%||0.2%|
Source: BGL (bglcorp.com.au). Data as of 30 June 2020
*Percentage each security makes up of the total SMSF Managed Fund investments e.g. PLA0002AU is 2.7% of the total SMSF investments in Managed Funds.