The mFund Settlement Service
The ASX decided to establish a trading platform for managed funds, mFund, in order to make it easier and cheaper for investors to access managed funds. The securities regulator approved the project earlier this year. Units in funds offered through mFund are not bought or sold on the ASX or priced on the exchange. mFund simply replaces the paper-based application system with an electronic straight-through process and it only applies to funds that choose to use the service.
The overall aim of the service is to make the distribution of managed funds more efficient and cheaper. Product providers have to make sure that investors have been sent the latest product disclosure statement before they can buy units in a fund.
The mFund platform had around 60 founding members representing a mix of fund managers, sharebrokers, platforms and registry houses and include Bell Direct, Platinum Asset Management, Challenger, AMP Capital, OneVue and Computershare.
There is a belief in Australia that the growth of managed funds has been held back by the application and redemption process that has always been slower and more cumbersome than buying securities on-market. The mFund platform is geared to making it quicker, easier and more efficient for investors to apply for, or redeem, units electronically in unlisted managed funds, using ASX market infrastructure.
How investors traditionally bought units in a managed fund
In the days before mFund, investors would use a paper-based process to buy and sell unit. Each investor would receive a product disclosure statement for a managed fund, complete the application form that went with it and send off a cheque or use BPay and mail the documents to their adviser or fund. This process is increasingly seen as being too time-consuming.
Using mFund, the application form in the product disclosure statement is replaced with a digital application form. A message sent via an ASX broker to the managed fund confirms that the investor has been given a product disclosure statement and this lets the fund issue units to the investor, or for them to be redeemed.
Benefits for investors
Managed fund units applied for or redeemed via mFund are consolidated through a single CHESS holding. This allows investors to consolidate their holdings in managed funds and shares through one statement, via CHESS, rather than through multiple information sources.
There is greater transparency and certainty on the status of applications; by time-stamping the receipt of the electronic application via mFund, investors will have their application processed more quickly leading to greater certainty around the price and the timing that units in the funds are issued or redeemed.
Daily prices used for accepted applications and redemptions are determined based on the fund’s net asset value at the end of the day, or in the case of some funds, when they are priced on a weekly, monthly or 90-day basis.
The first transaction using mFund took place in early May 2014 with APN Funds Management and Bell Direct as the first participants. The number of managed funds available on the ASX’s mFund Settlement Service recently increased from 43 funds to 46.
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Paul McNamara is an editor and journalist with over 20 years’ experience. His career includes spells with the Financial Times, Euromoney, BRW Media, Asia-Inc and Banker Middle East. At present he is editor of YieldReport. YieldReport is a digital newsletter that carries comprehensive pricing and commentary on Australian interest rate securities in a monthly and weekly report. Each issue covers bank bills, cash accounts, term deposits, government bonds, semi-government and corporate bonds, hybrids, ETFs, managed funds and more. Click here for a free trial subscription. |
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