Managed Funds

Money from individual investors is pooled and invested by a fund manager.

When you put your money into a managed fund, the investment decisions are made for you by the fund manager. Having a large pool of money to invest means the manager can usually get better deals than any one person.

The fund manager puts investors' money into a range of investments depending on the nature of the fund. Each fund has its own rules about what the manager can invest in, and these rules are set out in the trust deed or a deed of participation, and/or the investment statement for the fund. Some funds invest in shares, debt securities and property, both in New Zealand and overseas. Others specialise in particular types of investments or countries.

You can pick a managed fund with lower, medium, or higher risk depending on the level of risk that suits you. Read more about risk and your risk profile.

You pay fees when you invest in a managed fund. Different funds charge different fees and they can be quite complicated. For example, there may be an initial fee when you first invest in a fund, an annual management fee, and an exit fee when you cash in your investment. Some managed funds also charge separate administration fees.

Important information about the fund, including fees, risks and what it can invest in, should be summarised in the investment statement for the fund. More detailed information is in the fund's prospectus.

Types of managed funds

Unit trusts, group investment funds (GIFs) and superannuation schemes are the main types of managed funds.

When you invest in a unit trust or a GIF, you buy 'units' which represent a share of all the assets owned by the fund. As well as the fund manager, the fund will have a trustee to look after the assets for investors. For GIFs, the trustee may also manage the fund, or it may be externally managed. The value of your units in a unit trust or GIF will go up or down as the value of the fund's investments changes.

Some managed funds are listed on New Zealand's exchange NZX or overseas stock exchanges. You can buy and sell units in these funds. If you have units in a managed fund that is not listed on a stock exchange you can usually sell them back to the manager. However, you should check whether there are any restrictions on this.

Subscribe to RSS