Access to global equities has been made much easier for self-directed investors and self-managed super fund (SMSF) trustees through ASX’s mFunds.
mFunds are unlisted managed funds run by professional fund managers who use their knowledge and expertise to actively manage the fund and make investment decisions.
They provide a convenient way for investors to diversify their investment portfolio and gain exposure to other asset classes that are not easily accessible, such as global equities.
Diversifying an investment portfolio is one way to manage risk and is often referred to as “the only free lunch in investing”. In addition, with 97 per cent of the world’s listed companies overseas, there are many investment opportunities available to those able to access global markets.
For investors that may be unintentionally building up their cash holdings because they do not know where else to invest, or do not want to put more money into the same type of investments, considering an mFund may provide a way to better deploy low-return cash.
Here are three steps to taking advantage of this popular ASX service.
Step 1: Do your research and choose an mFund
The ease of access to mFunds allows investors to focus on how they want to allocate money and to which asset classes, and to choose from an expanded range of professional fund managers.
Testament to the healthy growth of the ASX mFund service, around 200 mFunds are now available and over 40 of them specialise in global equities.
The chart below highlights how mFund has helped investors. It shows the percentage exposure to a range of asset classes held by investors through mFund, to January 2018. Global equities and global fixed income were the most popular asset classes over the period.
Because of the large number of funds, investors can choose from a range of managers that:
When evaluating mFunds, investors can utilise the screener tool available on www.mfund.com.au. It enables investors to compare funds based on performance, fees and investment strategy.
Step 2: Read the product disclosure statement (PDS) and place an order via your broker or financial adviser
Historically, managed funds have not typically been easily available to investors who want to hold investments in their name or that of their SMSF. Many have been put off by the challenge of completing paper applications, providing certified copies of documents and sending these to fund managers. Managed funds acquired in this way have not been able to be held alongside other investments, such as shares.
However, the ASX mFund service enables investments to be made in a way similar to how share transactions are undertaken. This removes the burdensome paper application process because the service is accessed through an ASX broker and units invested in are held on the Holder Identification Number (HIN) in CHESS alongside existing ASX investments such as shares, LICs and ETFs.
The pricing of an mFund is different to that of a share. There is no on-market trading between investors. mFund applications go directly to the fund manager, who sets the price based on the value of a unit in the fund. Generally, managers set these prices daily and investors receive the relevant price after their initial application amount is received.
A major benefit of the mFund service is that investments, distributions and redemptions all occur electronically via CHESS – no cheques in the mail.
Step 3: Receive a confirmation and monitor your portfolio
Once your new mFund units are issued they will be transferred to your CHESS holding. Your mFund fund manager will send a welcome pack and you will receive an updated CHESS statement. Like shares and other ASX investments, mFunds appear on your unique CHESS HIN, allowing investors and SMSF trustees to have investments in the one place – on ASX.
When you log into your broking account you will be able to see your mFund units alongside your other investments. Also, if you use software to manage and track your portfolio, some providers are now able to link your mFund units into their software to make it easier for you to monitor your entire portfolio.
The mFund service has streamlined the process for investors to apply for units in managed funds. Investors can now focus on the investment decisions relating to which asset classes they should consider, how much they should invest and which funds they should use.
The key benefits of using mFunds include:
As with all investment decisions, investors should be sure to do thorough research before deciding and seek advice from a financial adviser.
Visit www.mfund.com.au to view the range of funds, each fund’s PDS, performance and prices. You can also register to be keep informed of future ASX education sessions around mFund.
Rory Cunningham is the Senior Manager, Investment Products for the Australian Securities Exchange (ASX).