Managed Funds Managed Funds blacklist

Hi,

I am quite new to the investment and hasn't had any good/bad experiences yet. However, reading through the forums and other websites I noticed one recurring concern from other investors.

People complain that some managed funds have "dirty" or cheap practices of achieving income through short-selling and other activities which in the end make investors pay CGT or get fully-taxed income instead of fully-franked dividends. In the end, they don't get as much income as they planned, and I don't want to end up in the same situation I am aiming to setup an income stream with some hopes for growth.

I read some posts, and the names of some funds come up (for example, here CFS is mentioned.

I was wondering if there is a blacklist, either public, or learned through bad experiences of forum users, of bad managed funds/fund managers which one'd better avoid if he wanted to get stable fair income.

On the related topic, is there a white list of good income-generating funds, which in my view should be funds with fair (franked) dividends. Is there a web site which would allow to see how much dividends and what kind a fund has generated, or to see real after tax returns (which would then allow to estimate the percentage of tax loss)?

To make suggestions simpler, I'm currently looking at the following funds:
AMPCI Core Property Fund-Cl A
AMPCI Gbl P'perty Sec's Fund-Cl A
AMPCI Small Companies Fund-Cl A
AMPCI Sustain Share Fund-Cl A
BlackRock W Comb'd Property Income
BlackRock W Hedged Global Small Cap
BlackRock W Aus Growth Share Fund
BlackRock W Global Allocation Aus
Colonial W Colliers Int Property
Colonial W Property Securities
Colonial W Aust Share Fund Core
Colonial W Global Resources Fund
Challenger W P'perty Sec's Fund
Challenger W Select Aus Share Fund
Challenger W Aus Share Income Fund
Challenger W Smaller Comp's Fund
Challenger W Asian Share Fund
Perpetual WFI Aus Share Fund
Perpetual WFI Geared Aus Share Fund
Perpetual WFI SHARE-PLUS Fund
Perpetual WFI C'centrated Equity Fd
Perpetual WFI Industrial Share Fund
Perpetual WFI Smaller Compan's Fund
Schroder Aus Equity Fund W Class
Schroder Asia Pacific Fund S Class
Schroder Gbl Emerging Mkts Fd W
Tyndall Aus Share W Portfolio
UBS Global AM Australian Share Fund

Any comments on these with regards to white/black listing?

Thanks.

Denis

 

Hi Denis,

I don't think there is a "blacklist" for managed funds, anyone who kept it would have to be very careful to make sure they aren't sued.

The majority of large fund managers don't have dirty tricks, they would ruin their own reputation very quickly, saying that there are posts here about some members complaining of one fund manager who took months to redeem funds.

You can look up Research Houses like Standard & Poors or van Eyk who will rate the funds. Try and stick to 4 or 5 star funds (A or AA for van Eyk) as these are funds the research houses believe have superior processes.

Your still looking at the RaboPlus offered funds aren't you?

Dan

PS Before making an investment decision speak to your FPA registered Financial Planner.

 

"People complain that some managed funds have "dirty" or cheap practices of achieving income through short-selling..."

Short selling has nothing to do with a ‘dirty’ practises and is totally legal.
Funds are buying, selling and selling short stocks to generate income. There is nothing wrong with it.

 

In regards to your white list, I assume that you aren't looking for the most income, but rather the most tax-effective income with a good after-tax return. Also, from a managed fund.

See attached report from Vanguard last year which nails 15 of the top managed funds in Australia.

 

certainly you wont the least amount of income paid by a fund, as any income goes straight ontop of your marginal tax rate. This is why fixed interest is the most tax offensive investment you can make.

On the other hand, you can offset this income with a negatively gear investment, like a IP.

 

Sim,

What you say is true. I personally don't consider income when investing, I consider the asset class and my exposure to it. To invest ONLY for income, or growth reduces your diversification.

In saying that, funds which have excessive stock churning not only increases brokerage costs to the fund, but tax liability.

 

Perhaps I used too strong a word, but I believe you understood. For my purposes, this is not what I'm looking for. So I want to avoid it, thus asking if anyone knows how to extract this information from say their financial reports.

 

Oh, I am so used to different legal system... Let's say it differently then - is there any summary information about the split of the income of the funds? In most reports or searches all you can see is income/growth percentage, but in order to be efficient in investment one needs to know a little bit more than that. Just wondering if there is a simple way of getting this information...

Thanks for the advice, I am considering S&P ratings where available... And I'm almost convinced not to go with RaboPlus (though I opened account already), but then I'm puzzled at what are the other options available to me...

 

That would probably be more correct - "most tax-effective income with good after-tax returns", thanks And I know about Vanguard, but then I need to figure out the rest of the portfolio.

 

I'm looking for franked dividends, as much as possible, and in unstable environment income is generally not a bad idea - many big companies still continue paying dividends even though they stocks (or market) is down. At least these money are guaranteed to be yours (after tax

What's "IP" by the way?

 

I see your point then, diversification requires a growth component. From my small personal investigation experience I somehow found that it is easier to diversify the growth, but hard to detect decent income generating entities. Perhaps the problem is in the quality of the funds that I've looked at. Or I just don't understand what I see...

 

Geez, thanks guys for your replies, really appreciate your opinions. Also wanted to thank the forum owners and everyone who contributed in the past - there is wealth of information on these forums, thanks for sharing!

 

Sim, are there any in particular you have in mind? CFS Imputation Fund, BT Imputation Fund, MLC IncomeBuilder, Vanguard High Yield Index Fund, the myriad of Value style funds out there?

 

I think thats something YOU need to research, no one is going to give you advise.

Look at longer term track records, fee's charges, is the brand reputable etc and choose something which you like.

 

You need to decide your investment objective. Are you in retirement and want income to support it? Or are you young and looking for max growth (as growth isn't taxed until sold).

What I meant was I don't break down my investing decisions and say I want X growth and X income. I invest in the asset class, regardless if its considered income or growth. I don't go looking for growth, or looking for income only investments. Growth funds can be sold down each month to provide income anyway if you need it.

If your looking for stable income, then commercial property is a high income asset class. You could expect 8% PA or or more paid even as often as monthly. If your looking at some good income funds, look at Cromwell and Orchard which own offices/commercial property and collect rent for you. They typically pay every month or quarter and dividend is stable.

Another income class is covered calls.. There are not many funds which do this, but covered calls strategy is typically a income strategy. Macquarie has one from memory.

 

My query was a bated one - the franking levels of the CFS, BT, Vanguard have been poor in comparison to replicators of the ASX 200. In general, the Imputation style funds have not provided good franked levels of income over the last 5 years. An example is Colonial First State Imputation Fund, BT Imputation Fund - which is not what the name would have you believe.

On top of that, the total after tax return has been poor ie MLC Income Builder and even the Vanguard High Yield Fund. Some of this is covered in the Vanguard article above.

Depending on what you define as easily accessible, you can email each fund manager and ask for a history of the franking level (ie a year by year breakdown) and breakdown of return for any investment option (ie capital growth and income). I find they're quite helpful when you mention you're a potential investor.

Agreed though, there should be a website that provides this information. Where the hell is Morningstar amongst all this? They have only just come around to after-tax returns. Why not franking levels?

 

If you don't want to pay tax on income, then commercial property trusts are for you. The Cromwell and Orchard funds pay up to 100% tax Deferred income, meaning you only pay tax on the income, once you sell the orginal units in the fund. so if you never sell, you never pay tax!