Managed Funds Play a Role in the Future of the Wealth Management Industry
Sydney, NSW, Australia, October 29, 2014 (Newswire.com) - The Australian superannuation industry has not only changed the retirement landscape making it compulsory for working Australians to put aside money for their retirement through federal legislation, but as a by-product, has turned many every day Australians into a financial investor. Some Australians may not consider themselves as such – but if they have a superannuation fund, then they most certainly are.
The growth in the wealth management industry has found its genesis through the growth of Australia’s superannuation industry, as the Federal government continues to revise superannuation legislation given the justifiable concerns of how it will fund the pension of a rising aging population when there are few workers to shoulder the tax burden. The recently announced budget changes proposing an increase to the pension age from 65 to 70 and the preservation age, the age in which superannuation can be accessed, from 55 to 60 years old depending on your date of birth, are further examples of how the government in playing an active role not just in social policy, but in the future of the wealth management industry.
Investors are also paying close attention, and so they should. After all, nearly all working Australians are affected by changes in superannuation legislation. Many investors are financially savvy and confident - if the assets held under investment is anything to go by. Increased investor confidence has also led to a rise in the number of self-managed super funds (SMSF’s) and furthermore, according to the Australian Prudential Regulation Authority (APRA), there is currently $1.84 trillion worth of assets in the Australian superannuation industry, increasing from just $245 billion in 1996.
Over the last 20 years, the superannuation industry has helped to shape Australia’s financial services and wealth management industry, making it stronger and more robust. As a result, not only are the superannuation funds being closely scrutinised, so too are the other investment vehicles as investors prioritise not only their retirement but their overall wealth accumulation strategy. Apart from the compulsory superannuation fund, investors are now realising that wealth accumulation is indeed a worthwhile financial goal, which not only helps to set them up for life, but that of their family’s as well, for now and all the way into retirement.
From the myriad of investment products available, managed funds are becoming increasingly more popular amongst investors than ever before.
Why are investors choosing managed funds?
Managed funds are a convenient way to invest as the fund is professionally managed investment portfolio operated by a fund manager, often referred to as an investment manager. The fund manager actively manages the fund in the aim of outperforming the benchmark, typically an index fund such as the ASX200. Investors benefit from the skills and expertise of a fund manager, who not only undertakes extensive research but also has access to resources, both internal and external, that aren’t generally accessible to individual investors.
To invest in a managed fund, an investor ‘buys’ into the managed fund by purchasing units rather than purchasing a single stock or share. When the unit price of the managed investment goes up, the unit holding increases in value and the investor profits. Ultimately, a fund manager decides what assets are to be included in a managed fund portfolio. Often they will choose from a broad range of asset classes including shares, fixed interest, cash and property and these assets can come from a wide variety of companies, industries and even countries. There are some managed funds that further control the assets in which they invest providing investors with even more investment options depending on their preferences and risk tolerance. For example, an investor can choose to invest in a managed fund that consists entirely of shares in Australian companies.
Investing in a managed fund is also relatively cheaper in comparison to other investment vehicles as it doesn’t require a large outlay to do so. In addition, investors also have the option of setting up regular contributions that will help to improve the value of their units holding and subsequently helping them in their wealth creation goals. An investor in a managed fund will generally benefit from the scale of the fund, with the fund generally able to access lower brokerage rates than most individual investors as well as benefiting from the diversification that the fund enjoys. “Managed Funds are generally an efficient way for investors to access a well-diversified portfolio that is managed by a dedicated and professional manager” said George Paxton, Fund Manager at APSEC Funds Management.
There is a growing number of Australians that have part or all of their investments in managed funds, and this number is only increasing given the convenience and diversification that managed funds offer. Regardless of whether you are a first time or astute investor and wish to invest in a managed fund, it is prudent that you seek independent advice to ensure that you select the best managed fund to help you achieve your personal financial goals.