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Etrade and managed funds

Discussion in 'Managed Funds & Index Funds' started by Capt'n, 20th Apr, 2007.

  1. Capt'n

    Capt'n Member

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    Location:
    Adelaide, SA
    All

    just wanting to hear from anyone that has experience with buying managed funds through etrade.

    I havent looked into this for a while and was just checking if this is still the case

    My understanding a few years ago was that the give you access to wholesale funds or also the traditional retail funds with lower entry fees. In both cases they bypass the traditional minimal investment amount by pooling funds. The result is sometimes delayed entry and exit dates.

    1)
    My question is if this is still the case.

    2)
    Additionally can one partake in a dividend reinvestment sheme which funds purchased through etrade.
     
  2. Glebe

    Glebe Well-Known Member

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  3. Capt'n

    Capt'n Member

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    etrade terms

    OK

    my assumptions were correct... here is what I found from www.etradeaustralia.com.au/Products/ManagedFunds/Terms.asp?


    1) no facility to reinvest

    So can I reinvest?

    Some fund managers give direct investors the opportunity to receive part or all of their distributions as additional managed fund units instead of cash. This is known as a distribution reinvestment plan. Participation in these types of plans is not currently available to E*TRADE Australia customers.

    To re-invest in a managed fund you will need to apply again using the same process as your initial investment.


    2) etrade uses indirect investment in funds (read below)


    So what is indirect investment?

    Using the ETRADE Australia Managed Funds Service gives you an indirect rather than a direct investment in managed funds.

    You still decide what to buy and your portfolio is available online 24 hours a day.

    However, indirect investing means that you are not the owner recorded on the fund manager’s register. The way the ETRADE Australia Managed Funds Service works is that we will arrange, through AUSMAQ, for the sub-custodian to buy or sell the managed fund on your behalf, rather than you dealing direct with the fund manager. This is because unlike listed financial products, there is no central transacting facility for managed funds where you can buy and sell funds yourself.

    So unlike listed financial products which you own directly, the paperwork for your managed funds doesn’t come to you. You can always ask us to provide you with a copy of anything that the custodian receives, or is entitled to receive, under law, from a fund manager. There is a charge of $50 for each such item sent to you.



    One upside of indirect investing with the Service is consolidated online reporting. No more assembling your portfolio information yourself. Tax time should be much easier with the report that we will supply to you.

    But you do give up some things by indirect investing - for example you may not be entitled to access internet sites reserved for direct investors of the fund manager, and you may not always be asked about what you want to do with rights attaching to investments (such as voting at meetings and distribution reinvestment plans).

    Buying and selling managed funds indirectly may also be slower than trading shares directly. This is because sometimes we need to wait for fund managers to do something (like process an order or provide information). It will usually take a few days to buy or sell units in a managed fund, but in some circumstances may take longer.

    Remember that with managed funds it isn’t guaranteed that you can access your cash when you need to. This depends on whether the managed fund offers a right to withdraw, and its processing times. Even if there is a withdrawal right, some managed funds can suspend this in certain circumstances, such as illiquidity of the fund. This is another important reason to read the relevant disclosure document.

    But our managed fund service is usually quicker than if you invested in managed funds yourself (even assuming you could access the funds we can) and because many of the managed funds are wholesale, you can benefit in cost savings and access to investments normally not available to direct retail investors.

    Indirect investing is different from direct investing. Here are some ways they differ.
     
  4. voigtstr

    voigtstr Well-Known Member

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    My Partner has a small amount of money parked in the Navra wholesale fund via etrade. I lodged a sell order on the 19th after (after the distribution hit the account late on the 18th). We are going to reinvest in the retail fund instead via investsmart so _we_ have control over reinvesting distributions.
     
  5. Apprentice

    Apprentice New Member

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    Does anyone know whether investing in managed funds via Commsec has similar limitations to Etrade?

    ie. Will I be able to reinvest distributions?
    Does Commsec use indirect investment in funds?

    Cheers
     
  6. Capt'n

    Capt'n Member

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    I haven't invested in managed funds via commsec for 4 years or so. At that time I purchased units in some of the colonial first state funds. Commsec basically acted like a discount broker. I had direct owner ship and dividends could be reinvested.... I had to fill out a downloadable order form and send it in.

    A quick look at commsec seems to indicate this is still true

    Here is my understanding of the comparison of purchasing managed funds

    Ownership
    ETRADE Indirect ownership
    Commsec Direct ownership

    Dividend reinvestment
    ETRADE Not automatically but can buy units (from memory there was a minimum amount eg $500) at any time.
    Commsec Yes, provided the fund allow you to.

    Minimum Initial Investment
    ETRADE From memory $1000 for any fund including wholesale funds
    Commsec Dependant on fund

    Benefits
    ETRADE With ETRADE the funds sit and can be viewed as part of your etrade portfolio. Its sometime handy to have everything in one place and may help if you are getting a margin loan with respect to both funds and shares... everything is in the one place. ETRADE offers access to wholesale funds with smaller fees. May be some minimum reinvestment amount eg $500

    Commsec Once purchased your account sits with the actual fund manager. ie in my case I was logging onto colonial first state. Simpler to program regualr investments. In the case of buying colonial through commsec their are no fees only a .66% (of total retained amount) trailing commision. None of the wholesale funds seem to be on offer.
     
  7. voigtstr

    voigtstr Well-Known Member

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    Investsmart cap their trailing fee, everything above the cap investsmart would pay you. Might be worth looking at if you're investing enough that the trailing cap would apply.
     
  8. stinkfoot

    stinkfoot New Member

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    sydney nsw
    what amount of distributions do these funds pay out every year??
     
  9. arandomperson

    arandomperson Member

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    Location:
    Melbourne
    I was saving via buying managed funds via etrade and was very happy with it, being able to monitor their growth in my etrade account, etc etc. There are some additional fees, but then also access to funds I would not normally have access to due as well.

    One big gotcha that bit me was when I went to a margin loan - I specifically went with a margin loan that was (claimed to be) integrated with my E*TRADE account, and had the same managed funds in its available security list as etrade so I culd gear my ETRADE managed funds.. But once the margin loan was all set up I found I could not transfer any of the ETRADE managed funds into the margin loan due to the Indirect ownership. This was a real PITA, and it appeared that neither the ETRADE or St George staffI dealt with were aware of this limitation until we all found it couldn't be done.
    In the long run though this has worked out OK as I have sold the ETRADE managed funds and replaced them with close equivalent ETF/LIC shares in the margin loan acct.
    i.e. replaced Vanguard ASX300 Index fund units
    with SPDR S&P/ASX 200 Fund shares.