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mFund celebrates third birthday on a high

Photo of Ian Irvine, ASX By Ian Irvine, ASX

min read

Over 12 months to June, mFund has continued to expand, with 150 per cent growth in value.

mFund allows direct investors and Self-Managed Superannuation Fund (SMSF) trustees to access other asset classes not easily available when investing in an ASX-listed share. ASX established the mFund settlement service in May 2014.

mFunds are unlisted managed funds. However, the mFund settlement service enables investments to be made in a way similar to how share transactions are undertaken. This removes the burdensome paper application process as access to the service is provided by an ASX broker and units invested in are held in CHESS alongside existing ASX investments such as shares, LICs and ETFs.

The ease of access allows investors to focus on how they wish to allocate investment funds, to which asset classes, and to choose from an expanded range of product structures, which for the past three years has included mFund.

Diversification – the only ‘free lunch’ in investing

Diversification across a range of asset classes can reduce risk, volatility and, in some cases, improve investment returns, especially when seeking to gain a better outcome than currently offered by cash and term deposits. mFund can help investors achieve greater diversification across their portfolios and SMSFs.

A snapshot of mFund:
As at 30 June 2017 there were:
• 55 investment managers, providing
• 174 funds, across a range of asset classes including:
o International equities
o Infrastructure
o Fixed income
o Property
o Australian equities such as small-cap companies

How mFund has performed

As mFund has been designed to complement existing investments and to fit around current holdings of shares, ETFs and Listed Investment Companies.

Because an mFund investment is a considered decision to gain exposure to an asset class, individual transaction amounts tend to be larger than a share trade. The average transaction amount is consistent with investment minimums at $25,000.

Starting the year at $150 million of value held in CHESS, by the end of FY17 this had grown by close to 150 per cent to $370 million.

The chart below shows the 12-month comparison between 2015-16 and 2016-17.

mfund growth chart

Source: ASX

How mFund has been used

mFund’s successful take-up reflects the objective of allowing investors to complement existing portfolios.

This is shown in figures at the end of June 2017: fixed-income products accounted for 36 per cent of the value invested and Australian equities (predominantly small-cap companies) accounted for 30 per cent.

The proportions invested across asset classes since inception has varied as investors become more aware of the service, how it works and the benefits it offers. The chart below shows the change in the use of different asset classes over time.

mfund asset mix

Source: ASX

Seeking advice may be helpful

Because the idea of using a managed fund may be new to some investors, many have chosen to engage an adviser to assist in forming an investment plan.

Typically, this may commence with a discussion around asset allocation – what is the right proportion or mix of assets for you?  Once a view is formed, the next step is to determine how to construct the right portfolio.

The good news is that there are a growing number of advisers who specialise in providing advice on a fee-for-service basis, in much the same way as an accountant charges for a specific piece of work.

This is confirmed with mFund transactions where advisers are more often involved with guiding investors and trustees in their decision-making; a financial planner is involved in 60 per cent of mFund transactions and 80 per cent are made in the name of an SMSF.

What I need to know

  • 80% of mFund users are SMSFs (probably not surprising considering the high holdings of cash in SMSFs and the level of exposure to large-cap Australian equities).
  • 60% of mFund transactions involve a financial adviser.
  • It may be helpful to use an adviser to assist in setting an optimal asset allocation and portfolio construction.
  • Accountants may no longer be able to provide investment advice if not appropriately licensed.

About the author

Ian Irvine is Head of Customer & Business Development at ASX.

From ASX

Visit www.mfund.com.au to find out more regarding:

What’s available by way of funds.

Data on fund

  • Performance
  • Management costs
  • Recent prices
  • A full list of each fund’s product disclosure statement (PDS), which describes important aspects and operation of the fund(Note: Before an investor can make an mFund transaction, they must receive a copy of the relevant PDS.)

How to access the mFund service.

News and articles from mFund managers regarding views on why their funds can help.

Upcoming ASX educational events:

Investor seminars

Webinars – including past webinars.

If you would like to view the ASX Investment Products Monthly Update to see where mFund fits in relation to other ASX investment products, or range of products available to assist with the construction of an on-exchange portfolio, visit here.

The views, opinions or recommendations of the author in this article are solely those of the author and do not in any way reflect the views, opinions, recommendations, of ASX Limited ABN 98 008 624 691 and its related bodies corporate ("ASX"). ASX makes no representation or warranty with respect to the accuracy, completeness or currency of the content. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian financial services licensee before making investment decisions. To the extent permitted by law, ASX excludes all liability for any loss or damage arising in any way including by way of negligence.

© Copyright 2017 ASX Limited ABN 98 008 624 691. All rights reserved 2017.
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