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A managed fund is an investment that is managed by a professional fund manager.
Managed funds are a popular choice for investors who don’t want to spend a lot of time managing their investments. KiwiSaver is one of the managed funds.
How does it work?
Your money is pooled with other investors’ money, and everyone owns a part of the total fund. The fund will have rules for how the money can be spread across different types of investments. It’s the fund manager’s job to choose those investments. Each managed fund has a strategy. This determines the assets the fund invests in, the level of risk to investors, expected returns and the costs of managing it.
What kind of returns can you expect?
Returns will depend on the composition of the fund and the performance of the assets that make up the fund. You may receive capital returns – expressed as a change in dollar value over time, and cash returns – made up of interest and dividends, which are usually reinvested in the fund.
If the fund contains a high proportion of growth assets (like shares or property), the performance may be more volatile (go up and down) but returns are likely to be higher in the long-term.
If the fund contains a high proportion of income assets (like bonds or cash), the performance is likely to be more stable but returns will be lower over the long-term. Your capital may not be guaranteed since the price of bonds can go down
Be aware of fees
Fund managers charge fees for managing your fund. Before you invest, it’s important to consider the management fee, administrative costs and any other expenses you’ll incur. These costs will impact how much money you make, especially in the long-term. Some higher fee funds may perform better over time due to being more active. Always ensure you review fees regularly to keep up with any changes.
Seek advice?
If you would like advice for Managed Funds, please fill the Generate Referral form
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