Unlisted Managed Funds: An Overview for Investors

If you're looking for alternative investments beyond stocks and bonds, unlisted managed funds could be a great option. In this article, we'll explore what unlisted managed funds are, how they work, and their advantages and disadvantages.

Table of Contents

1. Introduction
2. What are unlisted managed funds?
3. How do unlisted managed funds work?
4. Advantages of unlisted managed funds
5. Disadvantages of unlisted managed funds
6. How to invest in unlisted managed funds
7. Types of unlisted managed funds
   • Property funds
   • Infrastructure funds
   • Private equity funds
8. Risks associated with unlisted managed funds
   • Liquidity risk
   • Valuation risk
   • Concentration risk
9. Tax implications of investing in unlisted managed funds
10. Conclusion
11. FAQs

1. Introduction

Unlisted managed funds are becoming increasingly popular among investors looking for alternative investment opportunities. Unlike stocks and bonds, which are publicly traded on exchanges, unlisted managed funds are privately owned and managed by a fund manager. In this article, we'll delve into the world of unlisted managed funds and explore their advantages, disadvantages, and risks associated with investing in them.

2. What are unlisted managed funds?

Unlisted managed funds, also known as unlisted funds or unlisted unit trusts, are investment vehicles that pool money from multiple investors to invest in a range of assets such as property, infrastructure, private equity, or other alternative assets. They are called "unlisted" because they are not listed on a public exchange like stocks and bonds. Instead, they are privately owned and managed by a fund manager who invests the pooled money in various assets.

3. How do unlisted managed funds work?

Unlisted managed funds work by pooling money from multiple investors to invest in a range of assets. The fund manager is responsible for managing the fund's assets and making investment decisions on behalf of the investors. Investors buy units in the fund, which represent a portion of the fund's overall assets. The unit price of the fund reflects the value of the underlying assets, and investors receive returns based on the performance of the fund's assets.

4. Advantages of unlisted managed funds

Unlisted managed funds offer several advantages to investors, including:

Diversification

Investing in unlisted managed funds provides diversification benefits as they invest in a range of assets. This diversification reduces the risk of concentration in a single asset or asset class, which is common in direct property or equity investments.

Access to alternative assets

Unlisted managed funds offer investors access to alternative assets such as infrastructure, private equity, and property. These assets are typically not available to individual investors and provide opportunities for higher returns than traditional assets like stocks and bonds.

Professional management

Unlisted managed funds are managed by professional fund managers who have expertise in investing in various assets. They conduct thorough research and analysis before making investment decisions, which reduces the risk of investing in poorly performing assets.

Potential for higher returns

Investing in unlisted managed funds provides potential for higher returns compared to traditional investments like stocks and bonds. This is because unlisted funds invest in alternative assets that have the potential for higher returns than traditional assets.

5. Disadvantages of unlisted managed funds

Unlisted managed funds also come with some disadvantages, including:

Liquidity risk

Unlisted managed funds are not traded on public exchanges, which means they are not as liquid as publicly traded assets like stocks and bonds. Investors may have to wait for an extended period to sell their units in the fund, and the sale price may be lower than the unit's net asset value (NAV).

Valuation risk

Unlisted managed funds are not subject to the same level of transparency and regulation as publicly traded assets. This means that valuations of the fund's assets may not be readily available, and the fund manager may use different methods to value the assets, which can result in inconsistencies and inaccuracies in the valuation.

Concentration risk

Unlisted managed funds may have a concentration of assets in a single asset or asset class, which increases the risk of losses if that asset or asset class performs poorly.

6. How to invest in unlisted managed funds

To invest in an unlisted managed fund, you need to approach a fund manager or financial adviser who can provide you with information on the available funds and their investment strategies. You'll need to complete an application form and provide identification and financial information to the fund manager. Once your application is accepted, you'll be allocated units in the fund, and you can monitor your investment performance through regular updates provided by the fund manager.

7. Types of unlisted managed funds

There are several types of unlisted managed funds, including:

Property funds

Property funds invest in various types of properties such as commercial, residential, and industrial properties. They provide exposure to the property market without the need to purchase and manage property directly.

Infrastructure funds

Infrastructure funds invest in infrastructure assets such as airports, toll roads, and utilities. They provide exposure to infrastructure assets that generate long-term stable cash flows and have a low correlation with other asset classes.

Private equity funds

Private equity funds invest in private companies and provide capital to support their growth and expansion. They offer potential for higher returns but are also riskier than other types of unlisted managed funds.

8. Risks associated with unlisted managed funds

Investing in unlisted managed funds comes with several risks, including:

Liquidity risk

Unlisted managed funds are not traded on public exchanges, which means they are not as liquid as publicly traded assets. Investors may have to wait for an extended period to sell their units in the fund, and the sale price may be lower than the unit's net asset value (NAV).

Valuation risk

Unlisted managed funds are not subject to the same level of transparency and regulation as publicly traded assets. This means that valuations of the fund's assets may not be readily available, and the fund manager may use different methods to value the assets, which can result in inconsistencies and inaccuracies in the valuation.

Concentration risk

Unlisted managed funds may have a concentration of assets in a single asset or asset class, which increases the risk of losses if that asset or asset class performs poorly.

9. Tax implications of investing in unlisted managed funds

Investing in unlisted managed funds has tax implications, and investors should seek professional tax advice before investing. Generally, unlisted managed funds are taxed as a trust, and investors are liable for tax on their share of the fund's income and capital gains.

10. Conclusion

Unlisted managed funds can provide investors with exposure to alternative assets and diversification benefits. However, they come with risks such as liquidity risk, valuation risk, and concentration risk. Investors should seek professional advice before investing in unlisted managed funds and carefully consider their investment goals and risk tolerance.

FAQs

1. What are unlisted managed funds?

   Unlisted managed funds are investment vehicles that are not listed on a stock exchange and are managed by a professional fund manager.

2. What are the risks associated with investing in unlisted managed funds?

   The risks of investing in unlisted managed funds include illiquidity, lack of transparency, potential for high fees, and concentration risk.

3. What types of assets do unlisted managed funds invest in?

   Unlisted managed funds can invest in a variety of assets, including property, infrastructure, private equity, and debt.

4. How do I invest in an unlisted managed fund?

   To invest in an unlisted managed fund, you need to approach a fund manager or financial adviser who can provide you with information on the available funds and their investment strategies.

5. What are the tax implications of investing in unlisted managed funds?

   Unlisted managed funds are generally taxed as a trust, and investors are liable for tax on their share of the fund's income and capital gains. It's important to seek professional tax advice before investing in unlisted managed funds.

Investing in unlisted managed funds can be a valuable addition to an investor's portfolio, providing exposure to alternative assets and diversification benefits. However, it's important to carefully consider the risks associated with investing in unlisted managed funds and seek professional advice before investing. With the right approach, unlisted managed funds can be a lucrative investment opportunity for sophisticated and wholesale investors.