Investing in Managed funds

Investing in managed funds gives you access to many different types of investments, some of which are not normally available to individual investors.

What is a managed fund?

Managed funds pool the money of many individual investors. This money is then invested by a professional fund manager in different asset classes (e.g. shares, property and bonds) in line with the managed fund’s stated investment objectives.

When you invest in a managed fund, you are allocated a number of ‘units’, rather than shares. Each unit represents an equal portion of the market value of the portfolio of investments. Each unit has a dollar value, known as the ‘unit price’.

During the year the fund will earn income in the form of dividends or interest. It may also make profits on investments sold. The fund must pay all this income and realized capital gains to unit holders as ‘distributions’.

Why invest in a managed fund?

For some investors, managed funds provide the right amount of control without the time-consuming hands-on management required by direct investing. The advantages of investing in managed funds include:

n          Access to sophisticated investments. Investing in a managed fund gives you access to a range of investments that may not ordinarily be available or affordable to you as a single investor.

n          Experience of a fund manager. By investing in managed funds you can benefit from a fund manager’s expertise, resources and experience. This means you can spend less time managing your investments, and you also gain peace of mind knowing that your money is in experienced hands.

n          Diversification. Through managed funds, you can access different fund managers, asset classes, companies, industries, sectors and countries. To achieve this level of diversification when investing directly, you would need large sums.

n          Your money is managed by experts. The qualified investment professionals managing your money have access to information, research and investment processes not readily available to individuals.

n          Select your investment style. You can choose whether to invest in a managed fund designed to deliver income, or one focused on capital growth, or absolute return.

n          Distribution reinvestment. Managed funds make it easy to reinvest your investment earnings. This allows you to purchase more units with no additional cash outlay and take advantage of compounding over time.

Choosing a Managed Fund

Different fund managers have different investment strategies and objectives and these are stated within the company’s Product Disclosure Statement (PDS). This allows you to pick and choose investments to fit in with your own investment preferences and the level of risk you wish to take. It is important to understand the investment manager’s objective and style.

One particular style is an absolute return. In this case fund managers are looking to provide a return not correlated to the investment benchmark. As a means of achieving that return a long short strategy may be used which provides a more flexible investment approach and has the ability to produce positive returns regardless of market conditions. The benefits of the long short approach are increased diversification and greater downside protection.

K2 Asset Management is an Australian based absolute return manager that uses a long short approach.

To choose the managed fund that suits you, consider

n          How much risk you are comfortable with?

n          What is your timeframe?

n          What are your objectives?

It is important to consider the fund’s management style and experience in light of your objectives, financial situation and needs.

Information supplied by:

K2 Asset Management LTD

Phone: +61 3 9691 6111

Email: information@k2am.com.au

Website: www.k2am.com.au