Managed funds are one type of managed investment scheme, designed to essentially pool investors’ money into an account to create a larger amount of capital than if individual investors tried to go it alone.
These funds are managed by professionals or fund managers, who are charged with executing the agreed strategy and managing the trades of that particular portfolio.
To become a fund manager, an individual must have a high level of education, professional accreditation and licences as well as appropriate levels of investment management experience to apply to the fund or funds for which they are charged to manage.
Managed funds are diverse in nature and can often include a range of financial instruments, such as shares, commodities, currencies, bonds, but also can include leveraged products and CFD’s. This means there are occasions where co-managers will be appointed to ensure the best people with appropriate skills and experience are working for the investors of the fund.
The key duty of a fund manager is to select what shares, bonds and other assets the fund will buy with the investors’ money. The manager focuses on price-to-earnings ratios, asset price momentum, sales, earnings, dividends and other various metrics, the fund manager will build a portfolio of assets to accomplish the objectives of the particular fund.
There is a certain level of discretion that finds managers enjoy, however, in the prospectus documents of any managed fund there will be the specific markets, financial assets and risk tolerance that the trade will likely be obligated to follow, thus allowing investors some say on how and where their money is being invested.
That being said, as part of the pool investors have very little impact in terms of ‘day-to-day’ trading activities of the fund manager, as their role is to increase your asset value.
To ensure the fund managers can enact the strategy of the fund as they see fit, investors usually can’t access their funds rather access is provided on a periodic basis essentially proving a chance for the fund manager to prove themselves.
Although past performance shouldn’t be used as a predictor or indication of future performance – it does provide investors with a yardstick on how the fund manager – and the fund itself – has performed over the years.
It should be noted that performance should be graded not in comparison to all markets and benchmarks, but more on the index or markets being followed. If the fund is tracking a particular market or asset, they are subject to specific risks and volatility, which may not be experienced anywhere else in the market – this always needs to be taken into account on the performance.
It is important to use fund managers with professional accreditations, qualifications and recommendations from industry professionals who have experience in managing money effectively. To find out more get in touch today with Walker Capital.
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.