There are different types of ‘managed investments’ and the names can be confusing. You’ve probably heard about managed funds but there are others, including managed accounts and Exchange Traded Funds (ETFs).
The main appeal of managed investments is that they take the hard work out of selecting which assets to buy and sell, and when to do it. A professional investment manager does this for you.
Managed investments can provide a level of diversification well beyond the reach of most direct investors. An Australian share fund, for instance, could hold shares in dozens of Australian companies; a property fund can hold major assets like a commercial office block. This is especially valuable for investors with limited capital to invest.
As an investor, it pays to consider the level of control you want to have over your investments. With a managed investment, it is the professional investment manager, not you, who selects specific investments and decides when to buy and sell the underlying investments. So it pays to read the Product Disclosure Statement or other relevant disclosure document to check that it aligns with your own goals and circumstances.
And like all other investments, there are risks associated with a managed investment. In addition to the risks that apply to investing generally, for managed investments specifically, risks also include the possibility that the investment manager or managers may not perform as expected against their respective benchmarks.
Managed investments can invest across the full spectrum of asset classes, including cash, fixed income, property and shares. They can focus on a specific asset class such as infrastructure, a particular industry or even a specific country. Managed investments can also invest in other managed investments.
Just to broaden the choice a little further, some managed investments take an active approach to investing, trying to outperform the overall market and deliver strong returns to investors. Other managed investments are more passive, aiming to replicate the returns of a particular market index (like say, the S&P ASX 200 Index). The asssociated costs are likely to reflect these differences.
Managed funds – investment vehicles where the money contributed by a large number of investors is pooled and managed as one overall portfolio by a professional investment manager. Investors purchase units in the fund which entitles them to an interest in a pool of assets with the other unit holders.
Managed Accounts – are similar to managed funds except that instead of owning an interest in a pool of assets, a portfolio of assets is bought specifically for you and you are the beneficial owner of all the assets in your portfolio. This means they can be more tax efficient.
Exchange Traded Funds – They are listed on the share market, meaning they can be bought and sold like shares. They also allow you to invest in a range of asset classes or sectors.