Individually Managed Portfolio Vs Managed Fund

Where can you achieve complete Transparency and Control?

What is a Managed Fund?
  • Investors (often tens of thousands) pool their money together.
  • Investors do not have “legal” ownership of any underlying asset.
  • Investors own a share of the pool based on their unit holdings.
  • A Fund Manager is tasked with investing the pooled money.
What is an AFFIM Individually Managed Portfolio?
  • Individually tailored investment portfolios
  • Discrete portfolios - no pooling of money between investors.
  • Legal Ownership - Investors hold direct “legal" title to all assets.
  • AFF Investment Management is tasked with managing the assets on behalf of each investor.

Key disadvantages of Managed Funds

No Legal Ownership

  • Individual investors do not have “legal” ownership of the underlying assets but rather hold “beneficial” ownership. This important difference adds risk and has flow on implications.

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High & Unknown Fees

  • There are typically many fees, which can include: performance fees, buy sell spreads, internal brokerage fees, loss of interest on the cash account, entry and exit fees, administration fees, trustee fees and custodian fees, just to mention a few.
  • Fund managers may pay high brokerage on transactions to appease a broker who has previously conducted research for them. We have never seen these fees disclosed.
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Limited Control & Transparency
  • Investors are not made privy to what assets are held, the intricacies of transactions in and out of the cash account nor do they have a say in where their capital is allocated.
  • As all capital, income and fees are pooled, typically, at best, an investor receives a monthly newsletter where only a small number of investments are mentioned along with the unit price. Limited insight adds risk.
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Risky Mandates

  • Mandates force fund managers to invest a set minimum at all times regardless of whether prices are low or high. Being forced to buy when there are no compelling opportunities is dangerous.

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Serious Tax Issues

  • New investors inherit any unrealised capital gains already achieved within the fund.
  • Fund Managers can't inform investors of the fund’s tax components until after the end of the financial year. By then it is too late to tax plan.

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Potentially Locked In

  • If you decide to move your money, you may be forced to pay exit fees and tax on capital gains. While the change may be wise, the cost to leave may be too onerous.
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Unknown Investment Team

  • Typically, very few investors ever meet or have contact with the individuals managing their life savings. As such, many simply do not know whether their hard earned money is in safe hands.
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Impacted by other Investors

Should several large investors or many small investors request their money back at the same time, fund managers may be forced to either:

  • Sell the fund’s assets to fund redemption requests; or
  • Tell all investors they cannot get their money out.

Often this occurs during share market declines which results in the forced selling of good assets at low prices or denying access to money at a time it is most needed.

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Key advantages of an AFFIM Individually Managed Portfolio

Full Legal Ownership

  • Individual investors hold “legal” ownership of all underlying assets.
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Simple & Transaprent Fee Structure

  • Investors can see every cent coming in and out of their bank account and have access to all portfolio documentation 24/7. It is impossible for hidden fees to exist. Everything is disclosed and available to investors at all times.
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Complete Control & Transaparency

  • Investors know where all of their assets are at all times and can exclude AFF from buying anything they are not comfortable owning. This radical approach and transparency puts investors in complete control of their assets.
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Sensible Mandate

  • We believe it is sensible to only invest when compelling opportunities are available. If we do not see any opportunities or think the share market is overvalued, we have the option of holding cash.
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Best Tax Outcomes
  • As each investor owns their own assets it is impossible to inherit unrealised capital gains.
  • Capital losses may be available to offset tax liabilities on capital gains.
  • Optimum tax planning available. Tax liabilities can be determined real-time allowing investors to tax plan prior to the end of the financial year.
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Freedom to leave

  • While we hope they never would, should an investor decide to move their money away from AFF, there are no exit fees or tax liabilities. As assets are legally owned by the investor, they remain with the investor who simply removes AFF’s right to manage them. We hope this freedom to leave is one reason why our investors are happy to stay.

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Access to Investment Team

  • Each investor has the option to meet the individuals making the investment decisions on their assets. This empowers prospective investors with the ability to make a fully-informed decision on whether we are suitable to manage their life savings.
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Safe from other Investors

  • No AFF investor can impact the portfolio of another investor. If one investor wanted to cash in their assets, others are not forced to sell their investments too. Assets are bought and sold on each investors behalf based on their individual circumstances only.
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