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A Few Fast Facts about Managed Funds in Australia

Part of the Managed Funds For Dummies Cheat Sheet (Australian Edition)

For the trivia buffs among you, here are some intriguing facts about managed funds in Australia — the biggest, smallest, oldest, cheapest, most expensive, and the best and worst performing.

  • Size of the industry: The fund management industry in Australia looks after more than A$1.335 trillion in local assets (as at 31 December 2009). When you include money brought in from overseas and managed in Australia the amount goes up to $1.7 trillion. The industry is made up of more than 11,000 managed funds, with 131 registered fund managers operating. The top 30 fund managers control 86 per cent of funds under management. Compared with the rest of the world, Australia is ranked fourth by amount of money managed, after the USA (A$11.2 trillion), Luxembourg (A$2.3 trillion) and France (A$1.8 trillion).

  • Amount of funds under management: In 1992, the Australian government introduced a mandatory retirement income system through employer-sponsored superannuation. Since then, according to government figures, the funds under management (FUM) in the investment industry have grown by a compound annual rate of 11.9 per cent. In fact, FUM has doubled since 2003. In May 2010, the government announced an increase in the compulsory superannuation rate from 9 per cent to 12 per cent of each employee’s salary by 2020, no doubt adding further growth to the industry.

  • The first: The first investment in Australia calling itself a unit trust was, fittingly, the First Australian Unit Trust, set up in 1936 by Hugh Walton. However, the first investment company (not unit trust) was founded by JB Were & Son in 1928. Walton’s fund followed closely behind similar unit trusts that had begun to emerge out of post-Great Depression Britain in the early 1930s. The trust forecast an annual return of 10 per cent and charged a 7.5 per cent entry fee, which makes today’s typical 4 per cent look quite reasonable. The fund had a fixed 15-year term and, upon winding up in 1951, had generated 7.7 per cent per annum returns.

  • The oldest: The oldest fund still available to the Australian public is the Schroders Australian Equities Fund, set up in 1964 with more than A$1.1 billion in assets as at 31 May 2010. Schroders reckons that, since it began, the fund has returned 13.6 per cent per annum before fees. The second-oldest fund is the Perpetual Monthly Income Fund, which was established in August 1966, followed by the EQT Mortgage Income Fund, launched in 1971.

  • The largest: Platinum Asset Management and various cash management trusts dominate the top of the list for size. Up until mid-2010, Macquarie Group’s cash management trust (CMT) was the largest managed investment scheme in Australia and, at its peak just before the global financial crisis, had close to A$19 billion in assets. In 2010, Macquarie converted the CMT to an ordinary bank account. Platinum’s International Fund is the largest, with A$9.1 billion in holdings at 31 May 2010, followed by ANZ’s cash fund V2, with A$6.2 billion, the National Australia Bank’s Cash Manager, with A$3.6 billion, and the Platinum Asia Fund, with A$3.5 billion.

  • The smallest: A few funds operate with only A$10,000 in holdings. According to Morningstar, 87 per cent of managed funds have less than A$100 million in funds under management and, amazingly, 52 per cent of managed funds have less than A$5 million.

  • The cheapest: Funds that track a market index such as the S&P/ASX 300 Accumulation Index have some of the cheapest management fees around. The Macquarie True Index Share Fund charges no fees, according to Macquarie. Exchange-traded funds (ETFs) — similar to index funds but listed on the stock exchange — typically have fees ranging from around 0.2 per cent per annum up to 0.9 per cent per annum, depending on the market index being tracked.

  • The most expensive: Some managed funds charge both annual management fees and performance fees if they do well. Combining the two sets of fees, the most expensive retail fund in Australia is the Aspen Diversified Property Fund, with an annual cost of 4.54 per cent per annum and returns of an astonishing loss of 88 per cent over the 12 months to 31 May 2010. Funds that borrow money to invest, called geared funds, also make the expensive list, with many having annual costs running over 4 per cent.

  • The best performers: The three top-performing funds available to the general public in Australia over the seven years to May 2010 are specialist funds. The ING One Answer ING Small Companies Growth Fund returned 25.84 per cent per annum, the ING One Answer ING Resource Opportunities Fund returned 21.28 per cent per annum and the BT Classic Investment Natural Resources Fund returned 19.87 per cent.

  • The wooden spooners: The funds that have performed the worst in Australia over the five years to 31 May 2010 are all property funds. The worst performer was the Australian Unity Property Securities Growth Fund with minus 25.66 per cent return per annum. The Real Estate Capital Partners Enhanced Income Fund lost 12.41 per cent per annum and the EQT SGH Property Income Fund lost 5.78 per cent per annum

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