Managed Funds Your Comments on Fund Choice Appreciated

Hi Folks
I was just hoping to get some comments from people with more experience than me on the managed fund list I have come up with. The hope is to have a relatively diversified portfolio that has a strong performance history (thus hope to have a strong performing future!) All funds will be invested from an LOC and then margin loan on top to take margin loan lvr to 50% (except the China Fund, this is purely speculative and no margin loan will be done on it). The percentage they will make up of the portfolio is also included:

Australian Unity Property Securities - Growth Units 15% of portfolio
Perpetual WFI Ethical SRI - 10%
BT Imputation Fund - 15%
Macquarie Small Companies Fund - 15%
CFS Australian Shares Fund - 15%
Platinum International Brands Fund - 15%
Challenger China Share Fund - 5%
Platinum Europe Fund - 10%

Any comments/suggestions anyone can offer with regards to the above would be greatly appreciated (do you think it is too highly weighted towards a particular sector, too aggressive, etc). Obviously the comments will be taken as your own opinion, not investment advice, so please dont hold back with any concerns of this nature! Thanks very much for your time in responding.

 

Hi Coopranos,

A newbie to investing so no real experience to draw on to help you here but I wanted to suggest that maybe you could do a mock portfolio on somewhere like InvestSmart? If you set it all up as if you had purchased into the funds it will give you a breakup of the asset classes (sectors...same thing?) and % of how much is in each. This would help I think in showing you your asset diverisification and if you are too highly weighted in any one.

Can't help with the aggressiveness, sorry, am still learning and will be very interested myself to see what others say. I have been looking the Aust Unity one myself to put some into.

Cheers
Sharon

 

coopranos:

Just an observation, you don't have any exposure to global property, hedge funds or infrastructure. Not saying they're needed though.

Also, you say your Chinese selection is purely speculative, but is that in reference to your research or to China itself? All investments involve some speculation and China is... China. Have you thought that maybe it isn't so speculative compared to your other selections?

Personally, I'd go all of Asia like Sim suggested and gear into it, but that's just me.

 

Thanks for the responses folks.
Sim: The LVR on all the funds (except the China Fund) is 70%. My plan was to pretty much only invest in 70% funds, with a 50% LVR. All distributions would be paid into a bank account and interest prepaid for the appropriate period, and any excess over the interest component would be reinvested - either into the top performing fund or perhaps into a new fund altogether. Whenever possible (when capital growth and distribution reinvestments allow) keep pumping up the margin loan to stay around the 50% mark (sticking to 50% until I actually have some experience with the LVR volatility post distributions etc, at some point may allow the LVR to go up to 60% if I am comfortable with that).
The theory is to run this in line with a property portfolio - harvesting all the equity available each year, using the equity to first buy one property then any extra gets matched with a margin loan and pumped back into the managed fund portfolio. The hope is that over say a 10 period, consistently sticking to the plan and monitoring the investments, it would produce a fairly significant asset base and income.
Regarding the China Fund: I guess the reason I say speculative is from the perspective of being speculative for me given my experience and knowledge of that particular sector. I appreciate the suggestion of going into an Asia Region type fund, and will certainly consider it.
Thanks again for the feeback folks!

 

Self-praise is no recommendation...(just stirring - I'm sure you'll both do well. )

 

Hey coopranos,

I'm only new to the whole investing thing (purchased my first managed funds a year ago). However, out of your list I happen to have:

Australian Unity Property Securities - Growth Units
Macquarie Small Companies Fund - (Mine are the growth units)

I also have two other funds through CFS.

I'm only part way through a commerce degree at uni, so I'll just point out a few things that I like or hate about the funds from my experience and leave the number crunching to those with more experience.

The Aust Unity has performed the best out of my 5 managed funds, however they were slugging me a fee wrongfully which took about 3 months to sort out. They did however refund the money back into units in the end. I was a little annoied at the time it took tough. Another gripe with Aust Unity is the fact they will only issue statements every 3 months (I put money in monthly). They also have no online features.

Macquarie have an good online setup (this is important to me) they have also performed pretty well. I haven't had them for very long but I'm happy with the units.

I have the Global Resources fund and also Aust Geared Share fund through CFS. CFS have a fantastic online setup, it is very easy to put more money in, change things etc. This is important to me as I work casually and my income can vary from month to month, especially during exam block at uni.

Hope this helps

 

Hi Coopranos,
Have you looked into the fee's charged by those funds you've listed. A small difference in fee's can compound into a huge difference in returns over the investment lifetime. You might want to have a look at some lower cost passive funds from companies like vanguard and dimensional as the core of your investment, then invest into the more risky ventures like Internation Brands and China, etc.
Also - just wondering why you selected the Perpetual Ethical Fund? What makes them so ethical. Most of this ethical stuff is just BS in my opinion and they charge you higher fees for it.
Rgds,
Jason.

 

If you add funds to the MF with CFS via the website does it charge a fee? If you initially used a discount broker at 0% then will they apply that rate?

 

Hi there,
We are currently setting up two e-wrap accounts just to invest in China. They are new products offered through Investment Australia - Managed Funds - Financial Planning - 2020 DIRECTINVEST

It is still early days, but these accounts should save us lots of fees, and permit entry to previously unattainable funds...plus many of the usual funds. These savings will more than pay the admin cost of this wrap (which is cheap compared to other wraps).

They offer Nil entry fees on all funds, and the Wealthtrac e-wrap offers reduced MERs on several funds.

The main benefit for us is that it provides access to some funds which are usually unattainable to small direct investors (eg. Fidelity China Share Fund and Macquarie Premium China Fund). These funds usually accept only a minimum of 500k (Fidelity) and 3.4 mill. (Premium China - WOW - some investors must have a cool 3.4 mill ready to invest in China. It was interesting waiting on the phone to speak to someone at Macquarie about this fund: the recorded message/menu choice was in Chinese, so I guess a lot of local Chinese are investing lots there. We are not quite that brave and will invest a much smaller amount. I felt too embarrassed to mention how small it was to the guy on the phone.) E-wrap minimums required per fund are very low, even for wholesale funds. They pool funds from investors to make it all work.

Downside is you need 25k investment to start a Wealthtrac e-wrap (not mandatory but they say any less makes it not viable). Our other wrap requires $100k investment: Personal Choice Asgard e-wrap. We are doing both wraps as that was the only way to diversify into both of these China funds. We also had to set up a St.George margin loan as only a few lenders loan against these funds. They also offer an e-margin loan in the wraps, but it did not offer both these funds so we opened a normal margin loan. Several margin lenders accept these wraps and will loan funds for their products.

We may also get DirectInvest to take over as financial adviser for all our margin loans. Apparently part of our margin loan interest is going to the Navra adviser who stamped our original application, but DirectInvest take a much smaller trailing commission, giving us a much cheaper interest rate too.

I have spent the past few days wading through reams of paperwork, but hopefully it will all be worth it. Will keep you posted on progress.

Cheers
Seaview

 

Hi Sim

No more than 10%, or maybe 15%, but we are trying to minimise risk by spreading it over several funds. Hopefully they won't all crash at the same time, and we realize it may be a bumpy ride. But the growth in China is just too tempting for us to miss out on, though we are balancing it out with less risky funds.

Incidentally, I recall you mentioning a while ago about the poor governance etc in China for financial products adding to risk, but the latest Smart Investor and Freeman Fox inaugural magazine both feature articles saying this has improved greatly. We can only hope they are right.

We are also interested in a new product Macquarie are putting out around June: a revamped version of their Reflection Funds, offering a China fund. I read the PDS for the last Reflection Fund and did not like it much: threshold management fees, prepaid principle and interest, and maybe redeeming after 7 years (with possible CGT tho' maybe I got that wrong}. Anyway, we will wait and see what they come up with. They say the old Reflection fund is running at 90%, which is very impressive.

Well, must go now. Brain demands sleep.
Cheerio.

 

I've done it a few times, I use a discount broker and seem to apply it at that rate. It is great being able to BPay money into the fund.