Managed funds can be an effective means of investing when you lack expertise or the scope to oversee a fund yourself. We define what exactly they are, assess key advantages and disadvantages, and explore different types of managed funds below.
What are managed funds?
A managed fund is a type of investment vehicle where individual investors pool their money together to be managed by investment managers. The professional investment managers are responsible for making investment decisions and managing the fund's assets, which can include stocks, bonds, real estate, commodities, and other types of assets. The objective of a managed fund is to provide investors with access to professionally managed investments and to diversify their portfolios to reduce risk.
Managed funds can be a good option for those who lack the time or expertise to manage their own investments. By pooling their money, investors can benefit from the knowledge and expertise of investment managers. This may help investors to achieve their investment goals more effectively than if they were managing their investments individually.
What are the different roles in a managed fund?
A number of entities make up the roles assigned to the running of a managed fund – two such important roles include the investment manager and the custodian. The investment manager undertakes the responsibility of the selection and daily management of the underlying assets in a managed fund.
A custodian is a financial institution that holds and safeguards the assets of a managed fund. The role of the custodian is to ensure that the assets held by the fund are secure and protected from loss, theft or fraud.
What are the advantages of managed funds?
A key benefit of investing in a managed fund is the professional management that is provided. Investment managers are responsible for choosing what to invest in, monitoring the performance of the fund, and making changes to the portfolio as and when needed. This helps to ensure that the fund is well-positioned to meet its investment objectives and generate returns for investors.
Managed funds also offer investors the benefit of diversification. By pooling their money, investors are able to invest in a larger and more diversified portfolio of assets than they would be able to on their own. This helps to reduce risk and to spread investment returns more evenly over time.
Investing in a managed fund can also be more cost-effective than managing investments individually. This is because investing in a single vehicle of assets can help to reduce investment costs, such as trading fees, management fees, and other expenses. This can result in a higher return on investment for investors.
Are there any disadvantages to investing in managed funds?
There are some potential risks associated with investing in a managed fund. One of the main risks is the potential for poor investment returns. This can occur if the investment manager makes poor investment decisions or if the fund's assets perform poorly in the market. It is important to carefully research and evaluate the track record and investment style of a fund before investing.
Another risk is that the investment manager may charge high fees for managing the fund. These fees can eat into investment returns over time, reducing the overall return on investment. It is important to carefully review the fee structure of a fund before investing to ensure that it is reasonable and competitive.
Types of managed funds
There are many different types of managed funds available, each with its own investment objectives and strategies. Some of the most common types of managed funds include equity funds, which invest in stocks; bond funds, which invest in bonds; and balanced funds, which invest in a mix of stocks, bonds, and other assets.
Equity funds are typically designed to provide long-term growth by investing in a diversified portfolio of stocks. Bond funds, on the other hand, are designed to provide income and stability by investing in a diversified portfolio of bonds. Balanced funds aim to provide a mix of both growth and income by investing in a mix of stocks, bonds, and other assets.
In addition to these traditional types of managed funds, there are also more specialised funds that cater to specific investment needs and goals. For example, there are international funds that invest in foreign companies, real estate funds that invest in real estate properties, and commodity funds that invest in commodities such as gold, silver, and oil.
Liontrust offers a large range of equity funds, providing a variety of solutions to meet investors’ objectives. These include the UK Equity Fund, Global Equity Fund and US Equity Fund.
They are managed by different teams using their own distinct investment processes, but they are all actively managed funds based on high conviction approaches.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market. These stocks may be less liquid and the price swings greater than those in, for example, larger companies.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
