Managed fund
A pooled investment run by a professional manager, bought in units directly from the fund rather than on an exchange.
A managed fund pools money from many investors and invests it according to a stated mandate. You hold units whose value reflects your share of the underlying portfolio.
Unlike an ETF, units are bought and sold directly with the fund manager at a price struck after the market closes, rather than traded live on an exchange.
Distributions are paid periodically and can include interest, dividends, franking credits and realised capital gains. Each component is reported separately and taxed differently in your return.
Buy-sell spreads are an often-overlooked cost. Applying or redeeming units incurs a spread designed to protect remaining investors from transaction costs, which makes frequent switching between managed funds more expensive than it first appears.
Distribution components
A single annual distribution might contain franked dividends, unfranked income, a capital gains component and a tax-deferred amount — each treated differently at tax time.
The bit people get wrong
A tax-deferred component is not tax-free. It reduces your cost base, which increases the capital gain when you eventually sell, so the tax is postponed rather than avoided.
Common questions
Managed fund or ETF?
ETFs trade on-market with live pricing and brokerage; managed funds are bought directly with application forms and end-of-day pricing. Costs and mandates matter more than the wrapper.
When do I get my tax statement?
Annual tax statements typically arrive between August and October, which is why investors with managed funds often cannot lodge in early July.
Can I lose more than I invest?
In a standard long-only fund, no. Your loss is limited to the amount invested. Geared or derivative-based funds can behave differently.