Managed Funds CFS Property Funds

Discussion in 'Shares & Funds' started by shouldisell, 31st Aug, 2007.

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  1. Simon Hampel

    Simon Hampel Founder Staff Member

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    Yes, property is traditionally an income producing asset - particularly commercial property.

    You'd probably even find that much of the income being distributed is real income too - not realised capital gain ... although that depends on the fund and how much it trades.
     
  2. NickM

    NickM Well-Known Member

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    Hi Lads
    To answer your question capital gains can be used to offset income losses, but not the other way around.
    Many people get confused as capital losses CANNOT be used against income.
    The same principle applies for trusts and / or individuals
    fun isnt it ?

    Nickm
     
  3. Simon Hampel

    Simon Hampel Founder Staff Member

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    Ahh ... I see how I got it confused - so it's not quite as bad as I thought it was. Very happy to be corrected on this one - thanks Nick.
     
  4. Rob G

    Rob G Well-Known Member

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    Sim,

    With regard to units, you cannot stream the capital gains so no problems, everyone gets a bit of net income provided it is positive.

    If you have a discretionary trust and negative income other than capital gains (Venger's example) you will need advice from an Accountant as to whether you can distribute anything at all and to who as it depends on your deed and Taxation Law.

    Cheers,

    Rob
     
  5. shouldisell

    shouldisell Well-Known Member

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    Do I need to be careful when considering a fund, in regards to whether it's earning primarily as growth or income?
    Will it make a large difference to me in the long run?

    Or should I just be concerned with selecting a reliable fund which is performing well?
     
  6. Simon Hampel

    Simon Hampel Founder Staff Member

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    You obviously need to consider both factors (amongst others).

    It really depends on your current circumstances, and your goals. If you have, or intend to have other assets (eg directly held real estate) which are cashflow negative, then an income fund can help offset the holding costs of that asset and reduces (or removes) the tax problems normally associated with income funds. But you won't get as much growth. Of course, if you are trying to maximise your negative gearing benefits, then income funds will reduce the effectiveness of that negative gearing!

    If you aren't in that situation, then over the long term - a growth fund will most likely give better after-tax returns, since you don't pay much tax until you actually sell.

    There is another factor to consider (just to add to your analysis paralysis :p ) ... an income fund which pays high distributions compared to growth has a built-in safety feature whereby the returns you get from your investment are "locked in" quarter by quarter (or however often the fund distributes). If you take the distribution as cash and don't reinvest it - nobody can take that away from you (once the taxman gets his chunk), no matter what the market does next. Naturally if you reinvest the distribution to get that compounding growth happening, you are putting it back "at risk", and so this benefit no longer applies.

    A growth fund which distributes very little is very much at the mercy of the markets. However, this is naturally offset by the compounding growth effect, which should (in theory) show far better overall returns than an equivalent income fund - especially once tax is taken into account.

    So - it comes down to risk profile to a large degree ... income fund = low risk, but lower returns and higher tax bills ... growth fund = higher risk, but higher returns and lower short term tax bills (and remember that capital gains get a 50% discount when you eventually do sell - making the tax situation even better for growth funds !!)

    Unfortunately, only you can decide which is best for you!

    These are exactly the same issues that face investors in the NavraInvest funds - they are income funds with higher distributions and lower growth. I'm comfortable with that because of the reasons I mentioned above - I use the income to offset the holding costs of my IPs, and I have money in other growth funds to get me the more tax effective compounding growth as well - best of both worlds !!

    Personally, if I was starting out, was young (ie had plenty of time to make mistakes and learn) and didn't have any IPs, and wasn't planning to buy any in the short term - I would tend to go growth funds to maximise my returns.
     
  7. shouldisell

    shouldisell Well-Known Member

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    You're a legend Sim.
     
  8. DaveA__

    DaveA__ Well-Known Member

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    to through a pigeon in the bunch year, it is possible to trade an income fund as a growth fund bi annually...

    If you buy your fund on the 1st of July 2005, and sell it on the 30 June 2007, you would have received the ineffective distribution for 06 FY and for 07 FY any gains made could be sold and you recieve a 50% discount on it all. Then on the 1st July 07 you buy again at the lower price, however this is still not as tax effective as growth funds.

    Another alternative as well is imputation funds, where the fund manager seeks to promote income only however in a tax effective manner (ie with franking credits attached), this can be even more tax effective than a growth as if you are on a 30% tax bracket, it should effectively be tax free..
     
  9. Rob G

    Rob G Well-Known Member

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    Haven't seen any ruling on whether tax avoidance is an issue here ?

    Sounds like a profit wash in reverse ?

    Cheers,

    Rob
     
  10. shouldisell

    shouldisell Well-Known Member

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    Hey guys. This is the fund I was looking at originally, which InvestSmart said was 'closed'.
    Fund Profile


    I had a look over at Direct Access, and it doesn't seem to say anything about the fund being closed. Am I missing something here? How would I go about fnding out whether I can invest in this fund or not?

    Fund Details - Aust Unity Property Securities Growth - Australian Unity Funds Management Limited - Direct Access Australia

    The income to growth ratio seems about as good as I can find on any decent property fund.

    Cheers.
     
  11. bundy1964

    bundy1964 Well-Known Member

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    Only 3 investments are listed so you should be able to bypass the managers managing and go direct, they list the 3 they use here -

    http://www.australianunity.com.au/a...operty_Securities_Fund_Retail_Fund_Update.pdf
     
  12. AsxBroker

    AsxBroker Well-Known Member

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    Hi Compleks,

    The fund CFS MIF Property (FSF0012) is a direct fund, if you want to invest in "other" fund managers through CFS you may want to look at their FirstChoice platform, this may be more flexible for you.

    Colonial First State: Find a fund

    Shows the difference between MIF (Managed Investment Funds) and FCI (FirstChoice Investments) being 15 and 91 managed funds...

    Hope this helps you.

    Dan

    This is not advice to anyone to purchase or invest in any managed funds. Before investing in any securities you should discuss with an FPA registered financial planner, accountant or tax adviser your personal situation.
     
  13. shouldisell

    shouldisell Well-Known Member

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    Thanks AsxBroker.

    Forgive my ignorance though, I'm not sure I'm following.

    So Colonials 'FirstChoice' Investments are selected funds, which aren't necessarily managed by Colonial? So essentially you are just using your CFS account to invest in an 'outside' fund?
    Will I end up paying twice the management fees? Would it be cheaper to invest directly into the fund?

    Thanks again.
     
  14. shouldisell

    shouldisell Well-Known Member

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    Sorry, I'm not sure I follow.

    You're saying that the AUI Property Fund is actually invested in three different funds, and that it would be cheaper to invest directly in those funds (or one of those funds) Myself?

    I think I can find the three fund managers, but it doesn't mention any specific funds.

    How much money would investing directly save me? The MER doesn't seem excessively high, for what appears to be a pretty good fund.

    Thanks guys.
     
  15. AsxBroker

    AsxBroker Well-Known Member

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    Hi Compleks,

    Yes, Yes, No, Not sure you will have to compare the costs yourself.

    FirstChoice is a platform owned by CBA/Colonial , AMP own Flexible Lifetime, St George own Asgard, ANZ own ING (JV), National own MLC.

    There are also smaller platforms which aren't owned by these larger entities.

    Usually there are up to three costs involved, Management Expense Ratio (MER) which is paid to the fund manager, Administration cost which is paid to the platform provider to do all the administration and adviser trail.

    Sometimes yes and sometimes no, the MER on retail funds can be higher than on wholesale/platformed funds. You will have to compare them yourself to see which is cheapest.

    Cheers,

    Dan

    The above email is not advice to anyone to invest in any of the abovementioned platforms or investments. Speak to your FPA registered financial planner, accountant or tax adviser before investing.
     
  16. bundy1964

    bundy1964 Well-Known Member

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    Legg Mason Asset Management: Products - Fund Summary PST

    Fund Profile

    2 out of 3 Invesco don't do a local proerty fund so I guess they are using an American version not available here. A fund manager would use a wholesale fund where you would be retail, still they charge you fees on top of fees for something you could do yourself.
     
  17. shouldisell

    shouldisell Well-Known Member

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    Thanks guys.

    Bundy, is there anyway I could find the fund which is contributing predominantly to the growth of the AUI fund?

    The 'Credit Suisse' fund you posted seems to be mostly income producing (according to Direct Access). I couldn't find anymore information on the 'Legg Mason' fund specifying growth and income distributions.

    cheers.
     
  18. shouldisell

    shouldisell Well-Known Member

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    Any ideas guys?

    I'm still very new to all this, but am keen to get my portfolio growing.
    Has anyone here got money invested in the "Aust Unity Property Securities Growth" fund?
    Fund Details - Aust Unity Property Securities Growth - Australian Unity Funds Management Limited - Direct Access Australia

    It appears to be a well established fund, and its performance has been very good as far as I can tell. The income to growth ratio seems about as well balanced as I can find in a good property fund.

    I don't want to wait too much longer before expanding my portfolio. Once I have 2-3 funds (hopefully giving me a good variety of exposure) then I will focus more on making regular contributions.
    I still have about $10,000 to 'play' with, but I want to use that to set up a good fund base, rather than putting it all into the one fund.


    Thanks.
     
  19. DaveA__

    DaveA__ Well-Known Member

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    yep im invested in it... all i can say is dont chase last years returns...

    would not be my first choice again, ive written plenty on why throughout this forum
     
  20. crc_error

    crc_error The Rule of 72

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    Compleks, if you invest via colonial, you can setup your portfilo allocation within the platform, and each time you make a contribution, your money is automatically allocated to each fund. If you go seperate, then you need to send seperate monies to each fund. Some have min deposit amounts, so regular investing may become harder.

    For smaller amounts of money the fee's I don't think will make much differance, and may be worth having all in one place for convieance, tax statements, etc.

    Once you hit $100,000 with colonial, you can invest via their wholesale products, which have lower fee's. But keep in mind, if you switch, you will pay tax on capital gains.

    Personally I feel Australian Units is far to volitile for my liking.. I think APN or CFS property securities are more stable options.

    It is a good idea to setup your 'fund base' now, cause if future if you decide to sell in one fund and buy into another one, you will pay tax... so better to try to get as much right now as possible.

    Plus remember if your invested via investsmart, some of the colonial fee's are rebated back to you anyway.

    If you want a idea on how to structure your portfilo, I personally work with the 40/40 10/10 rule.

    Put 40% into shares (20% Australian 20% international) and 40% into property (again, 20% into australian and 20% into international)

    The other 10/10 you could put into something more 'risky' like global resources, asia fund, global infrustrure fund. You should also keep some money in 'cash' as well.. maybe 5%

    Remember any geared options have double the exposure, so you would put $50,000 into a ungeared fund to get the same exposure as $25,000 in a geared option.

    The only fund I see colonial lacks, is a Australian geared property fund. I believe macquarie has one.

    In my portifilo, I also have a global and australian small companies funds. I have 6 funds at present.. looking at global resources and global infrustrure at present as been my next potential investment. Diversification is good :) Lowers risk unless you feel you can pick a winner!