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Managed Funds

What is a Managed Fund?

A Managed Fund, which is more commonly known as Shares, pools your money with other investors to form an Investment Fund.

 

Why should you do it?

Investing in Managed Funds offers many advantages including diversification, convenience and the benefit of investment specialists who have access to the latest research and information.

It can help your tax efficiency depending on your individual situation, but it is important to talk to a professional because it can negatively affect you if done incorrectly.

 

How can FAA help you?

When recommending and selecting Managed Funds, you can be confident in the knowledge that your advisor is recommending funds that have been thoroughly researched. When selecting Managed Funds there are a number of qualitative and quantitative aspects that must be considered.

 

Some of the things we consider important areas for qualitative assessment are:

  • Business Stability - the stability of the manager as an established and well run business
  • Organisational Strength - depth and expertise of managers
  • Communication & Support - ability to communicate and provide information to advisers and clientele
  • Investment Personnel - ability and knowledge of investment personnel
  • Investment Process & Philosophy - manager style
  • Investment Expertise - discipline and consistency of investment process

 

And for quantitative assessment we look at:

  • Performance - measured using standard returns for a given period, logarithmic continuously compounded returns then risk adjusted returns such as the Sharpe Portfolio Performance Measure and the Jensen Portfolio Measure.
  • Risk / Return Measures - an extension of the above measures that basically examine the amount of return received for the risk the manager has taken.
  • Consistency Ratios - the consistency of the manager to under/outperform the broader market
  • Expenses - the management expenses of the fund
  • Fund Size - the total pool size
  • Tax efficiency - issues such as realised gains and imputation efficiency

 

© 2016, John Hehir, Financial Advisers Australia

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