This article appeared in the July 2014 ASX Investor Update email newsletter. To subscribe to this newsletter please register with the MyASX section or visit the About MyASX page for past editions and more details.
By Ian Irvine, ASX
Around a third of Australians currently invest in shares, yet only a portion diversify their investments across unlisted managed funds, according to the 2012 ASX Share Ownership Study.
So if you've thought about diversifying your portfolio to include a range of asset classes, it may be worth considering unlisted managed funds.
In this interview, we ask Ian Irvine, Head of Customer and Business Development at ASX about the recently launched mFund Settlement Service, which allows you to buy, hold and sell unlisted managed funds through a process similar to buying and selling shares. This means less paperwork, less effort and greater diversification for you.
ASX Investor Update: What does mFund mean for investors?
Ian Irvine: It means a few things. First, investors can now access a broader range of asset classes and funds that were previously not available on ASX. For example, they could invest with PIMCO, one of the world's largest bond managers, via mFund. Or they could gain exposure to global credit investments through Bentham Asset Management if that suits their investment needs. Offering these and other funds via mFund gives investors more scope for diversification and greater ability to tailor their portfolios.
Another benefit is administrative simplicity. Investors may have shied away from using unlisted managed funds in the past because they involved filling in long application forms, providing 100 points of identification, posting the application and including a cheque, or using BPAY.
ASX Investor Update: Who does mFund suit?
Ian Irvine: It's designed for investors with medium- to long-term investment horizons, including those with smaller amounts to invest (many funds in the service have minimum investment amounts of $20,000) to high-net-worth individuals. Self-Managed Superannuation Funds (SMSF) which can also benefit from using mFund, in particular those wanting to deploy part of a large cash holding into other asset classes, to potentially achieve higher returns and improve diversification.
ASX Investor Update: How would mFund work for an investor who wants to invest, say, $50,000 in an unlisted managed fund?
Ian Irvine: The starting point is the same for any investment. The investors must consider their goals, investment time horizon and risk appetite - and choose an appropriate investment to match their needs. Using the mFund website, investors can search for managed funds via asset class, sector, manager, and fees. They get to review a list of funds, including a fund profile outlining relevant information about the fund (minimum investment amount, for example), a performance chart for that fund, and a link to the fund's Product Disclosure Statement (PDS).
They then should read the PDS to assess if the investment is suitable. Importantly, before an order can be placed, they will need to confirm that they have received the most recent PDS for the mFund in which they are investing. Following that, they instruct the broker to buy $50,000 worth of units in their chosen managed fund. It's a simple process.
In turn, the fund manager prices the units after receiving the investor's application, usually overnight or the next day for daily priced funds. Typically, within 1-2 days, the investor will know the unit price they bought at. That is much quicker and easier than the current process where the investor obtains a hard copy of the PDS or goes to the fund manager's website, downloads the PDS, fills in a long application form, has an authorised party identify who they are and sends it off to the fund manager by mail. Another benefit of faster application processing is the potential to buy and sell units in the fund closer to the manager's pricing cycle - that is the, application is received today and priced tonight, instead of when the mail arrives in a few days' time.
mFund also means the investors' managed fund is included alongside other ASX investments, such as shares, listed investment companies (LICs), and exchange traded funds (ETFs) via CHESS. Previously, the investor might have bought the fund through an investment platform, meaning their managed fund holding was on one statement, and their shares, LICs or ETFs on another. Now, the information is all in one place.
ASX Investor Update: What should investors who are interested in mFund do next?
Ian Irvine: Watch the explanatory video on the mFund website and look at other information on the site. It has comprehensive educational and fund information, and useful tools to sort funds. As always, investors should talk to their licensed financial adviser about the suitability of managed funds for their portfolio, while self-directed investors should do additional research of their own.
The key message is that retail investors, generally, should think more about asset allocation within their portfolios, and how best to choose and transact investment products that fulfil those allocations. As part of that, they should consider how mFund can help achieve their goals.
To find out more about mFund and how to diversify your portfolio with less effort, visit mFund.com.au where your can register your interest in upcoming mFund events, view detailed information about the available funds and see through which brokers you can buy and sell.
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