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Discussion in 'Managed Funds & Index Funds' started by Compleks, 13th Dec, 2007.

  1. Compleks

    Compleks Well-Known Member

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    Hey guys, I just received this email from InvestSmart:

    Has anyone looked into this?

    I just noticed there is an initial investment of $50,000 required, which is well out of my budget. But I was still curious to hear some other opinions on this fund.
     
  2. voigtstr

    voigtstr Well-Known Member

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    If a margin lender would lend on it, you would only need 25k of your own money (perhaps less depending on the LVR)

    If they run a savings plan... even better!
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    1% is a bit high for what is effectively an ASX20 index fund.

    I think it is targeted at people who know and trust the InvestSmart name, but don't know enough about managed funds to realise that this is expensive.

    I'd be looking for something around the 0.2% - 0.5% MER range.

    For example: Vanguard (who aren't the cheapest) charge 0.75% for the first $50,000, 0.50% for the next $50,000 and 0.35% for the balance over $100,000

    As an alternative to an index fund, the State Street SPDR S&P/ASX 50 Fund (an index-tracking ETF that you buy on the stock exchange) only charges 0.286% MER
     
  4. voigtstr

    voigtstr Well-Known Member

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    Just checked the pds, 25k min with a 50%lvr margin loan. They dont have a savings plan as such (eg there is no 1k entry with low monthly top ups)
     
  5. Compleks

    Compleks Well-Known Member

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    I'm still thinking about what I should do next with my investing.

    I've been saving for a fourth fund, and was planning on entering an international share fund (I already have an aus share, aus property, and international property funds). This was probably going to be my last fund for a while, so that I could focus on making contributions to a balanced portfolio.

    However, I'm still not sure about the international share fund. My property funds have not been doing well at all, which doesn't bother me too much as it's still early days.

    I have heard many people mention the 'State Street SPDR S&P/ASX 50 Fund'. I was curious to hear some opinions. Should I continue with my original plan and look for an international share fund, or maybe put my money into the SPDR ETF?

    I know you guys can't tell me what to do, but any suggestions would be great. What would you guys do?
    I would be looking at putting $5,000 into an international share fun (as that is what I opened the other 3 funds with, and I would like to keep it balanced). I would probably have some cash left over, but I'm not sure if I would want to invest in the SPDR ETF with less than $5,000 initially.

    Thanks for the input so far.
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    If you have a long term view, I think that some international exposure in the mix is a very good idea ... historically Australian shares aren't the top performing worldwide - that's been a recent phenomenon, which is likely to revert back to normal levels when the local economy eventually slows down.

    If you have a look at the stats I've got so far on Compare Funds ... Fund Statistics | Sorted by Last 3 Years Return | Region Global (ex Australia) | Sector General Equities ... you'll see that over the past 3 years, Perpetual's version of the Vanguard Int Shares Index fund has outperformed everything else (I don't actually have stats for any of Vanguard's direct index funds yet).

    I'm not necessarily suggesting that Vanguard's fund is the most appropriate - but I think it's a pretty good, relatively low cost way of getting very broad exposure to international markets.

    If you want more of a value-added approach, you could look at the Platinum funds - which I still like, despite their relatively poor performance in recent years. You need a minimum a $25,000 for direct investment, but you can get into the Platinum International fund via a number of retail platforms (CFS has them as does BT ... although at 2.46% MER, CFS's version is quite expensive). The thing to remember with the Platinum funds is that they are generally value investors - they play for long term growth, not chasing the short term returns. They will also use hedging strategies to try and benefit from both the upside and downside of the markets (and currencies).

    The other alternative if you are looking for more risk - is to go focussed into emerging markets, either directly in China or India, or perhaps a broader "Asian" fund, or maybe even a BRIC fund. I'd tend to go broad first, and then look at focussed funds later - there's a lot of downside risk to a region-focussed approach ... especially one as volatile and unpredictable as China.
     
  7. Compleks

    Compleks Well-Known Member

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    Thanks Sim, I'll definitely look into this further.

    I would like a fund which I can access through CFS, for convenience. I was looking at the Platinum funds a while ago, after they were recommended by someone (possibly yourself).

    If I were to go with Platinum (through the CFS platform), this would be the fund I'm looking for, right?
    Profile: Colonial First State - Platinum International (FSF0409AU)

    I still don't fully understand how hedging works, but I have found some good resources which explain it.
    Is the fund I linked to above hedged? Or is there a separate hedged version of the fund?

    Cheers.
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yup, that's the fund.

    This fund IS currency hedged and Platinum use short selling to capture returns on the downside too (they do this with all their funds).

    There is also a newer unhedged version of the fund (no currency hedging) - which isn't available through CFS or other retail platforms that I've seen yet ... called the Platinum Unhedged Fund.
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Note that Platinum International, like many international share funds - has been pretty flat over the past 12 - 18 months. I wouldn't be expecting 20%+ returns in the near future ... indeed I'd think 10% would be a good start - they're only up 6% since July LAST year, while for comparison, the Vanguard International Shares Index fund is up nearly 20% over the same period!
     
  10. lync

    lync Member

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    Actually, the Market Leaders product looks like the kind of thing that I am interested in. I referred to the Top 20 article in the thread I started last week on Protected Equity Loans.

    I have had a quick look at the PDS, and the thing I like is that I can exit the arrangement without triggering a CGT event. The shares just transfer over to me for a minor admin fee ($25 per holding). There are other similar products out there (one I looked at was BT Elect), but the fees are higher, and some charge brokerage extra.

    The 1% is negotiable to wholesale clients.

    The discussion re MER's is interesting to me since I have no experience of MF's, but at first glance I thought 1% looked OK. So for a $100k portfolio I pay $1000 and get a consolidated statement, etc.

    I am interested in knowing if the cheaper fund rates are available only through a wrap a/c or an adviser? What would those MER's be to a Retail Investor off the street, I wonder. I'll do some research on that.

    Thanks for the lead
     
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    For general retail managed funds, 1% is pretty good (typically you'd expect to pay 1.5 - 2% or more).

    However, most fund managers justify charging this much or more because they are "adding value" by picking the best stocks and timing their buying/selling to maximise returns above and beyond the index.

    Now many fund managers actually fail to outperform the index over an extended period of time, so the argument is that you could have achieved the same result by investing in a passive index-tracking fund (or index tracking ETF) which charges only 0.2% or so.

    I haven't read the PDS for this product, but from the descriptions here, it sounds as though there is no value-add ... they simply buy and hold the funds in the ASX20, swapping over quarterly if the constituent funds change. In which case, 1% is quite high for them to do almost zero work - it's a nice cash cow for InvestSmart, trading on their brand name and (arguably) not actually offering something that is better value than what you can get elsewhere.

    Why pay more for something that adds no value by doing so ? It's not as if the stocks you are getting are better quality - BHP is still BHP :rolleyes:

    I certainly wouldn't be paying $800 to get some nice neat reports at the end of the financial year.
     
  12. Compleks

    Compleks Well-Known Member

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    Good points, Sim.

    In regards to Vanguard V's Platinum. Do you think I would be cutting myself short by investing in Platinum just so I can keep all my funds together. It's purely for convenience in terms of easier management, and hopefully additional contributions in the future.

    I'm leaning towards Platinum, and then holding these four funds with CFS as my 'backup'. I plan to keep them indefinitely at this stage and make contributions whenever I have the cash.

    Once I have these four funds, then I would like to look into other forms of investing, such as direct shares, ETF's etc...
     
  13. AsxBroker

    AsxBroker Well-Known Member

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    Hi,

    Merrill Lynch/Black Rock were running a similar idea with a savings plan.
    Realistically for direct equities, these are expensive compared to Vanguard.
    Also Vanguard cut out the bottom stocks which would be the ones constantly moving in and our of the index which would add to your trading costs.

    Cheers,

    Dan

    PS This is general information and not investment advice, speak to your FPA registered Financial Planner before making an investment decision.
     
  14. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I should actually mention here that I currently hold only Platinum Asia. I have previously held most of the Platinum funds, but sold out due to lacklustre performance. Most recently I held Platinum Unhedged in my SMSF, but sold out at a modest profit (after only several months) due to a change in strategy.

    I currently have most of my broad international exposure via the AXA-Nat Mutual Funds Mgmt Ltd Ws Global Equity - Value Fund (which is going pretty poorly so far this financial year) and from Equity Trustees Limited T. Rowe Price Global Equity ... which is not doing too badly compared to many other global funds (up about 5% or so this FY). These funds are from the PPI1 investment - so there was a relatively limited choice in funds.

    I also have other sector specific and region specific exposure to international shares too.

    If I was not heavily geared and I already held Platinum International and preferred to hold for the long term ... I'd be happy continuing to holding on to them - I still think they will do well long term. However, a highly geared strategy like I am using needs regular returns to avoid eating into capital to fund the loan shortfall - which is why I tend to get rid of poor performers rather than just hold long term (the tricky part is not to sell too early or too often!).
     
  15. lync

    lync Member

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    Hey guys,

    Sorry the discussion looks like it has moved on, but I sat down and read the InvestSmart Market Leaders PDS last night, and the thing that I didn't like was that there is no automatic distribution.

    Their default position is to collect all the dividends and re-invest. You can request a withdrawal at anytime (minimum $1000), but I reckon that would create potential tax issues if you are using borrowed funds to invest.

    I am looking at a partial debt recycling strategy to get rid of some of our PPOR mortgage, so would want to extract some of the dividend income. I think this could cloud the tax deductibility of the borrowings.

    Sim, thanks for your views on cheaper index fund. I had a look at the Vanguard offering, and think it looks interesting.

    One question though: are you aware of any funds that index only to top 20 or Top 50? The ones I looked at were all at least tracking ASX200. I know there is an ETF, but I was thinking more of a MF.

    Cheers
     
  16. lync

    lync Member

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    Hey Compleks,

    You've got me on the trail now. These products are called SMA's - Separately Managed Funds.

    2020DirectInvest, which is a similar operator to InvestSmart, has a similar product offering, only the minimum entry is $5000 and a minimum savings plan of $500 per month. Cost is 0.99%.There is an optional Margin Lending facility which allows a regular 1:1 contribution of minimum $500 from you topped up with $500 from the ML.

    This one also appears to address the concerns I had about tax impacts on withdrawals by paying Dividends into a separate cash account which you can opt to withdraw or have reinvested.

    These things appear to be popping up all over the place at the moment.
     
  17. lync

    lync Member

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    Sorry, SMA = Separately Managed Account
     
  18. bundy1964

    bundy1964 Well-Known Member

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    ETF works for me the SFY which is the top 50 is not all that liquid compaired to STW which is the top 200. As of last look there were no sellers of SFY and some days there are no trades, not a problem if you are buying and holding, if you want to sell in a hurry you may get some gapping in value.