Some global bond funds and Australian fixed interest funds had fairly impressive performances in 2014, causing more interest rate securities investors to wish to explore the managed funds area more.
Interest rate securities investors in Australia interesting in gaining an exposure to managed funds are spoilt for choice. Returns on these managed funds for the 12 months of 2014 range from 16.10 per cent from the Legg Mason Brandywine Global Fixed Income A fund in the Global Bond Funds category, to 11.69 per cent from the BT Government Bond fund in the Australian Fixed Interest category, 4.54 per cent from the Perpetual High Grade Treasury fund in the Australian Enhanced Cash category and 2.83 per cent from the IOOF Cash Management Trust in the Australian Cash Funds category.
*All of these returns are after fees.
Investors deciding on which managed fund they want to invest in will want to look beyond simple returns, however and will want to establish a range of other things before deciding whether the product is right for them including the scale of management fees and the size of the fund.
Perhaps of greatest value for the investor looking to invest in managed funds for the first time is the fact that the fund will have to give a clear indication of its performance over recent years and this may help investors to come to a decision on whether a particular fund is right for them or not. Perhaps the greatest appeal is that they can offer investors exposure to a wide range of assets in one vehicle.
Because such funds can be easy and convenient for investors, they sometimes come with higher fees than might be associated with other classes of investments. What is clear is that fees can vary widely and it may not be a quick process to try to exit from a fund if the investor changes his mind or becomes unhappy with the performance of the fund managers.
Active versus passive managed funds
Actively managed funds involve the fund manager making decisions and transacting trades to achieve best returns. As a result, these funds will tend to have higher fee since the investors is paying for the fund manager’s expertise. Passive, or index, funds merely aim to track and index and therefore require far less input and as a result should have lower fees associated with them.
mFund Settlement Service
mFund is a recent initiative by the ASX that aims to make lengthy form filling by investors wishing exposure to managed funds a thing of the past. The mFund Settlement Service lets investors access unlisted managed funds and allows them to buy, hold and sell units in unlisted managed funds through a process similar to buying and selling shares.
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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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