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Both Shylea Ulrick and Lifestyle Advisers are authorised representatives of AvalonFS AFSL 437518.

Managed Funds, Property or Mortgage?

Making a decision on where to invest your money can be difficult. Talking to your financial adviser will help you work out which avenue of investment is best for your situation. Knowing some of the terminology before you talk to them, may help you better understand the advice they are providing you.

Managed Funds

What are managed funds?

A managed fund is an investment vehicle, in which groups of individuals invest money, towards the purchase of a pool of investments, where investors do not have day to day control over the investment. The beneficial interest in the assets is divided into units that are issued to each investor. Each unit is equal to another in terms of its rights and entitlements.

What is the difference between wholesale and retail managed funds?

Retail managed funds are designed to cater for individual investors with minimum investment amounts ranging from $1,000, with some offering regular savings plan options.

Wholesale managed funds are designed to cater for professional investors with significantly higher minimum investment amounts, typically in excess of $100,000 per fund. However, investing via Masterfunds and Wrap Platforms can reduce this range to a few thousand dollars.

A wholesale fund is no different to a retail fund except that there are lower fees and a higher minimum entry amount. Every fund has management expenses that cover all the costs of doing business. These include administrational costs such as account tracking and sending out updates to fund members. Since many of the funds will allow you to get in with about $1,000 or even less (usually if you are setting up a savings plan), this can mean a relatively high proportion of management expenses are incurred mailing things out to members and processing payments.

Typically a wholesale fund will have a minimum entry amount of over $100,000. Because they are taking money in larger blocks obviously there are greater economies to be had and thus members of wholesale funds will create a lower cost per dollar to administer the funds. Thus, management fees, summarised by the management expenses ratio (MER) will be lower in a wholesale fund. You never actually see the MER on your statements as a visible deduction, management expenses are invisible and come out of the total returns. The MER is stated in the prospectus.

It is not uncommon for funds to market the same investment as a wholesale fund or a retail fund and quote a different MER for each. If the fund returns 16% before expenses, the retail version will return 14% to investors if the MER is 2%. The wholesale version will return 15% if the MER is 1%.

Management Fees

Cost to the investor comprises the Management Fee, the Trustee Fee, Expenses and the wholesale investment management cost of the underlying investment products selected by the investor.

The fees charged by a wholesale fund are usually lower than a retail fund, however the investment strategy applied by a manager to retail and wholesale fund may be the same.

Entry or exit fees on the average retail unit trust range up to 5%, annual management fees up to 3% from which a trailing/ongoing commission ranging from 0.25% to 0.80% is paid. Annual management fees charged by wholesale fund managers are approximately half that of the fees charged by retail funds.


Retail products tend to have an amount set to cover expenses such as prospectus and investor communication costs. These costs tend to be minimal in the case of wholesale products. The difference in this charge would tend to be in the order of 0.2% – 0.5%.

For example:

  Wholesale Funds (using a Platform) Retail Fund
Minimum Investment $1,000 $50,000
MER 0.97% 1.89%
Earnings % paid to client (assuming managed fund earns 10%) 9.03% 8.11%


Property investments are a key asset class of any portfolio. The types of property investments include Direct Property and Property Trusts.

Direct Property

  • Property directly purchased by you is a tangible asset but illiquid.
  • You can borrow against it.
  • It will generate rental income as well as potential capital growth.
  • It is a long term investment for you.

Other considerations:

  • A significant deposit is required to purchase.
  • Associated purchase costs, such as stamp duty, can be high.
  • Other issues to be considered are poor tenants along with maintenance, repairs, rates and human the drain of personal effort.

Property Trusts

  • Are investments which are unitised and are generally offered by Fund Managers and Institutions. It is not necessary to have a high in-going capital amount.
  • Maintenance and administration issues are assumed by the Fund Manager for a predetermined fee.
  • They also provide income and potential for capital growth, but have limited liquidity as the investment is usually for a set period, e.g. 5 years.
  • The liquidity of investments in property trusts can depend on the type of trust:
    • With listed trusts a prompt exit is possible.
    • With unlisted trusts exit can be restricted, for example where the investment is for a set period, e.g. five years.


Investing in mortgages is lending money to companies and individuals for the purpose of purchasing properties. In return for your investment, you generally receive interest from the borrower for the period of the loan with an exception of receiving all of your investment capital at the end of the loan period.

The capital value of the investment does not fluctuate because it is generally unable to be traded on the market. As mortgages are unable to be traded, redemptions from these investments may experience delays. As the money is loaned to companies and individuals, the capital value of the investment may decline if a borrower defaults.

Mortgages generally offer a higher potential rate of return than cash due to this default risk. Mortgages also offer a potentially higher rate of return than bonds in a rising interest rate environment and a lower potential rate of return than bonds in a falling interest rate environment. However, mortgage values are also generally less volatile than bonds.

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