Pakenham, Cranbourne & Beaconsfield

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Managed Funds

Managed funds allow investors to pool their money together and have professional investors buy investment assets on their behalf. The investor owns “units” in a trust that owns the underlying portfolio. The units are valued every day along with changes in the value of the underlying assets.

There is a lot of jargon around managed funds, sector specific, multi manager, multi sector etc which can be off putting.

The investor can choose what asset or assets they have managed for them. If I am strongly convinced that International Shares is where I need to invest then I look for a manager specialising in that area. If I want my money spread over a number of different assets like cash, shares, property and bonds then I want a “multi- sector” fund. If I want a blend of different assets but also different managers managing those assets I look for a “multi -sector, multi-manager fund”. I’m sure you think it’s simple now!

Not all managed funds are created equal. Not all fund managers share the same skill level or are as well resourced. Likewise, neither you nor your financial adviser can pick which fund will be the top performer next year. Fund Managers have different styles and where we are on the economic cycle will influence which style outperforms.

Our approach to managed funds is that your portfolio should be made up of “sector specific” managers. Your Australian share component of your portfolio should be invested by specialist in the Australian share market, your fixed interest component should be invested by specialist bond managers and so on. We do not use a diversified (multi sector) fund invested by one company. The analogy could be like comparing the Olympic decathlete with the balanced fund manager. The decathlete has to do well in 10 events, the balanced fund manager has to have expertise in many asset classes. Would a decathlete win against a specialist javelin thrower or sprinter? I would expect the specialist in that particular event to have an advantage!

We also recommend our clients to use more than one manager per asset class to have diversification of investment style.

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