How to access managed funds

  • Deposits into a managed fund can be made with an initial amount, as one-off extra payments or as regular deposits that are part of an investment or savings plan.
  • You can transact with a managed fund directly, through your financial adviser or stockbroker, or through a platform.
  • You can invest in managed funds through a super fund if it offers these as investment choices.
  • If you have a self-managed super fund (SMSF) and you invest money from it into managed funds, the units or shares in the managed fund are held in the name of the SMSF rather than by you personally.

You can deposit money into a managed fund in a few different ways.

You transact with a managed fund when you deposit or place money into it or take money out. Putting money into a managed fund is sometimes called making a contribution. Taking money out is called making a withdrawal.

Deposits can be made with an initial amount, one-off extra payments or regular deposits that are part of an investment plan. You can withdraw all your money from a managed fund in one go, you can withdraw only part of it  or you can arrange to receive regular payments in the form of what is known as an income stream.

When you place money into a managed fund, in practical terms what you are doing is buying units in the fund or buying shares in the listed investment company (LIC). When you withdraw money, what you are doing in  practical terms is selling or redeeming units.

A managed fund might also pay you a distribution, which is when it makes a regular payment to you from its investment income. For example, a managed fund that holds investments in shares might make distribution payments to you from the dividend income it receives, or a managed fund that holds investments in property might make distribution payments from the rental income it receives.

When you transact with managed funds, the responsible entities of the funds have to follow special rules. These rules extend to intermediaries, like financial advisers and stockbrokers, which responsible entities may  authorise to handle these transactions on their behalf.

These transactions can be made by cheque, in cash, or through EFT payments. To complete the transaction, investors have to fill in an application form, either on paper or online. They will then be issued with units in the managed funds. If they  are buying shares in an LIC, the share transaction is handled in the same way as regular ASX share transactions.

In the sections below, we describe the people, agencies and authorised representatives you must use when conducting these transactions.

Transacting directly with the managed fund

Investors can transact directly with the managed fund of their choice. To do this, they must know the name, ID numbers and operator of the fund because they are approaching the fund directly.

Transacting through a financial adviser

Financial advisers are specially trained experts qualified to help investors establish and implement a financial plan. They are licensed by the financial consumer regulator, the Australian Securities and Investments  Commission (ASIC), to act in your best interests and provide you with independent advice.

This advice may include recommending particular managed funds to you.

Financial advisers can be found at most banks, insurers and super funds or they are available through wealth management groups. A major advantage of using a financial adviser is that they have relationships with many managed fund operators. They can provide you with a wide variety of choices when using administrative systems - known as platforms - that contain managed funds from across the market, spanning all the asset classes and investment types.

Transacting through a stockbroker

Stockbrokers are specially trained experts qualified to help you buy and sell market securities, such as shares and bonds, and many can also arrange managed funds transactions. While financial advisers specialise in  providing advice, stockbrokers specialise in helping investors execute their securities market transactions. Stockbrokers can be licensed financial advisers, and financial advisers can be licensed stockbrokers.

Transacting directly through a platform

An investment platform is an administration system purpose-built to enable investors to handle their investment transactions with various types of managed funds, monitor their investment performance, administer their  taxation liabilities and provide regular reports. Investment platforms may be referred to as investment wraps, portfolio services or managed accounts.

Financial advisers use platforms to offer a wide range of investment choices they make available to clients. Some of these platforms are now available to investors directly without having to go through an intermediary, such as an adviser or stockbroker.

Investors who transact with managed funds directly through investment platforms do not normally have the support of expert advisers. Therefore they are responsible for their own decisions.

Transacting through your super fund

Investors who are members of a super fund can use their fund's investment menu to make selections from a range of strategy and asset class options Most of these investment choices are managed and administered by the super fund itself, but some funds offer members extra choices that can include retail managed funds, exchange traded funds (ETFs), LICs and model portfolios.

When you transact with these options through your super fund, however, you have more restrictions because these investments are part of your superannuation. There are strict rules concerning how you access these investments due to the concessional taxation arrangements associated with superannuation and the requirement that these investments form part of your retirement savings.

Managed funds and SMSFs

If you have a self-managed super fund (SMSF) you can invest money that you have contributed into the SMSF into a managed fund. The managed fund units or shares are owned by the SMSF rather than by you, meaning they become assets of the SMSF.

In these cases, you are not accessing managed funds through the SMSF but using the SMSF's funds to invest into the managed fund. When you report the SMSF's assets you will include the managed fund units or shares alongside other assets of the SMSF.

Income from managed funds held in SMSFs is taxed at the nominal superannuation rate of 15% rather than at your personal marginal tax rates - this is why investing through an SMSF is so attractive for many investors.

IDPS, wraps and managed accounts

The administrative platforms investors use to access managed funds can be known variously as investor directed portfolio services (IDPS), wraps or managed accounts. These platforms are sophisticated gateways that enable your financial adviser or managed fund promoter to assemble many investment solutions in one place. IDPSs and wraps are essentially the same thing.

Managed accounts are newer generation platforms that generally have more advanced features, such as being able to offer managed funds and model portfolios that let you own the underlying securities in your name rather than through the fund.

If you are investing for your superannuation, you will need to bundle these investments through your superannuation fund, which may be through a master trust or an SMSF.

 Different types of managed funds
 Who runs a managed fund?