Looking To Compare Managed Funds? We’ve Done A Comparison

When looking at a comparison of managed funds, there are several key elements that always should be factored in by investors doing their research.

Firstly, one needs to compare the types of managed funds available on the market, before reviewing the actual fund performance themselves. This is because there are multiple types of funds not only in terms of their risk preference, but also the types of assets in which they invest.

Single asset funds, as the name suggests, invests in one type of asset, such as shares or bonds, property, currency - you name it, but they stick within that asset class.

Then there are mixed asset options that focus not so much on the asset class, but what mix of assets will provide the best results for the fund’s investment strategy. For example, a balanced or growth fund, may contain a number of different asset classes to achieve their goal._[1]

According to Canstar there are nine key categories that they rank and research their managed funds into for the purpose of comparison and they include:

• Multi-Sector Aggressive
• Multi-Sector Balanced
• Multi-Sector Growth
• Multi-Sector Moderate
• Australian Cash & Fixed Interest
• Global Bonds
• Australian Shares – Large Cap
• Australian Shares – Mid/Small Cap
• Global Shares – Large Cap_[2]

The reason for such a ranking is due to the fact that the underlying performance of a fund is tied to the investment strategy the fund manager is to employ and based on the risk preference of the investors.

For example, the 10-year Compound Annual Growth Rate (CAGR) would be assumed to be best in the aggressive investment fund, however, the multi-sector moderate over the Canstar ranking had a better performance (4.67% vs 3.85%) over the recorded period!

It must be noted that although the aggressive funds in some years may make exceedingly high returns, they can also sustain much heavier losses than a more balanced or moderate approach – this means it is important when comparing funds to work with your advisors on your particular financial strategy.

Your personal circumstances such as current financial earnings, future potential earnings, years left in the workforce, superannuation, and level of assets all have bearing on what investment strategy you should look to employ when comparing managed funds.

Where do I start when doing a managed fund comparison?

If you are considering investing in one of the 12,000 managed funds currently available in Australia, according to the Australian Investors Association there are four key things to do:

1. Consider your investment objectives
2. Choose your broad category of fund, such as Large Cap Australian Equities
3. Explore Morningstar's research to narrow down your choices
4. Consider entry and exit fees, ongoing management fees and the buy/sell spread^[3]

In addition to this sound advice, it is always vital to speak to independent and expert fund advisors to ensure that any investment in any asset – not simply managed funds - are compared diligently in line with your personal investment objectives.

[1] https://www.moneysmart.gov.au/investing/managed-funds/choosing-a-managed-fund

[2] https://www.canstar.com.au/managed-funds/types-of-managed-funds-and-how-they-perform-long-term/

[3] http://www.investors.asn.au/assets/resources/education/managed-funds/Managedfundschecklist.pdf

For the full breakdown on managed funds check out our article: The essential Information you need when looking to invest in managed funds.

We welcome you to give our team a call to discuss your investment goals and objectives.

You can call Walker Capital Australia on +61 2 8076 2210, and we’ll see how we can help you achieve your investment goals.