mFunds: Invest in managed funds online

If you’re looking to invest in a managed fund you may want to consider mFunds. An mFund is an unlisted managed fund that you can put money into through an online share trading platform.

This is possible because the funds are signed up to be settled by the Australian Securities Exchange (ASX) mFund service. It means that you can easily track your holdings online in the one place along with other investments such as shares and ETFs.

Follow our guide to find out how to invest in managed funds and how they’re different from other kinds of funds.

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Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

*Brokerage fees shown are for standard share trading, see below for a list of mFund fees.

What is an mFund?

An mFund is an actively managed unlisted fund that you can invest in through an online broker and which is settled by the ASX’s mFund Settlement Service. The service, which uses the CHESS ASX settlement system, allows you to buy and sell units in managed funds that aren’t listed on the ASX quickly and easily online.

The mFund service launched in 2014 and there are now more than 200 funds available from 68 fund managers.

CHESS: The computer system used by the ASX to manage share transaction settlements and record holdings.

When you buy units in an mFund, your holdings may be electronically linked to your Holder Identification Number (HIN) through the ASX, which means they can be tracked along with other investments such as shares and ETFs in the one spot such as an online broker.

What types of mFunds can I invest in?

As is the case with regular managed funds, mFunds can pool your money into any number of securities such as bonds, shares, cash and property. Many of these are single-asset funds, though it’s also possible to invest in a mixed asset fund, which could include cash, shares, property and more.

You can also invest in specific sectors, such as a fund of Chinese company stocks or a portfolio of Australian infrastructure stocks, or broader themes, such as an ethical company fund. These range from high risk to low risk and some are highly volatile.

For example, emerging market funds will be higher risk than Australian equity funds. It’s important to do your homework or speak to a professional before investing. There are 10 main types of mFunds available as categorised by the ASX. These are:

• Australian equity. Australian shares of major companies.
• Australia Small/Mid Cap Equity. Small to medium Australian company shares.
• Global equity. Shares from companies listed around the world.
• Asian equity. Shares of companies listed in Asia.
• Emerging Markets equity. Shares in companies listed in emerging economies such as India, China, Brazil and Argentina. These tend to be high-risk funds.
• Infrastructure equity. Stocks in Infrastructure companies such as railways, airports, electricity production, gas and water facilities.
• Australian property. Shares in Australian listed and unlisted property companies.
• Global property. Property shares of companies listed overseas.
• Australian dollar fixed income. Australian government and company bonds and cash.
• Global fixed income. Australian government and company bonds and cash.
• Mixed Asset. Investment may include Australian shares, international shares, property, bonds and cash.

What are the best performing mFunds?

To date there are more than 200 mFunds on the market. Here are the 10 best performing mFunds over the past five years after fees (to June 2019). It's important to remember that past performance isn't a guarantor of future results and it will depend on economic trends, fees and management decisions.

Source: ASX | June 30, 2019 *MER = Management expense ratio. This is an annual fee taken by the fund provider and is calculated as a percentage of the fund's balance.

What fees do you pay to invest in mFunds?

There are several costs associated with investing in mFunds including brokerage fees, management fees, the minimum investment and price per unit.

• Brokerage fees. These are charged by the broker or online share trading platform for any settled trades. Each time you want to buy additional units in the fund you’ll need to pay this fee, which tends to range from $30 to $40.
• Management fees. Sometimes called management expense ratio (MER), these fees are charged by the fund issuer. They cover the cost to manage and adjust the assets held within the fund’s portfolio and other associated costs. Fees range from around 0.2% to 1.9%.

Here are some of the online and full-service brokers that provide access to mFunds along with their associated brokerage fees:

How are mFunds different to regular managed funds?

mFunds are regular managed funds but with the added bonus that they can be settled by the ASX mFund service. Put simply, instead of applying through a paper mail application or a full service broker, you have the additional option to invest in one quickly through an online broker.

Example of mFund investing vs direct investment

For example, the UBS Emerging Markets Equity Fund is a managed fund that is available through the mFund Settlement Service. You have the choice of applying for units through mFund via a stockbroking service or you can apply for units directly in the fund by mailing in a paper form.

mFund investment method. If you apply for units in the UBS fund through the mFund, you’ll be charged a brokerage fee and your minimal initial investment is $5,000. You will be able to apply for units quickly in an online application through a trading platform or broker. Your money is transferred from your selected bank account automatically. Your mFund units can be tracked online along with other investments such as shares.

Direct investment. If you apply for units directly in UBS, you avoid the brokerage fee, however your minimal investment in this case is twice the amount at $10,000. You’ll also need to apply by filling in a paper form and posting it in the mail along with identification and bank details. You’ll then have the option of transferring funds via bank transfer, cheque or BPAY.

How are mFunds different to ETFs?

Both mFunds and (exchange traded funds (ETFs) are investment funds that hold a collection of assets owned by the fund issuers, but there are a few differences:

• Listed vs unlisted funds. Unlike ETFs, mFunds are not listed on a stock exchange, which means you aren’t buying or selling mFund units from or to other investors. However, mFunds are settled by the ASX’s mFund service, so the ASX is responsible for transferring ownership of units to buyers after payments have been processed.
• ETFs are mostly passive. Unlike mFunds, most ETFs are “passive” investment products (index funds), where the fund simply tracks an index such as the ASX200 with little interference from fund managers.
• mFunds are active. To date, all mFunds are actively managed funds. This means that portfolio managers actively buy and sell shares and other investments to try and beat the market and achieve higher returns – at the same time, they typically charge a higher fee for the service.
• Trading times. Like stocks, the price of ETFs fluctuate throughout the day as they’re bought and sold on the stock exchange. Managed funds are only traded once per day after the market closes.
• Transparency. While exchange traded funds are required to disclose the fund’s underlying assets on a daily basis, mFunds have no such requirement.

How to invest in mFunds

You can invest in mFunds through select full service brokers and online share trading platforms. To date, there are 20 brokerage services that offer access to mFunds.

Investing in mFunds through your broker is similar to investing in shares. Simply select your desired fund and place your order – you shouldn’t need to supply any additional paperwork than you normally would when investing in a managed fund. The funds will settle as they normally do from your bank account.

To invest in managed funds follow these steps:

1. 1. Find the right fund. You can find all available mFunds via the ASX mFund page. When deciding on which fund is right for you, you should take into account the fund’s performance over different time frames, the associated risks, what assets it holds, your minimum investment and other costs associated. You can find additional details on the fund issuer’s PDS or on its website.
   2. Find the right broker. Even if you have a broker, it’s important to check the brokerage fees for mFunds as these are usually higher than standard share trading fees.
   3. Place your order. You can place your order via your broker or online trading platform by selecting your chosen fund and investment amount.
   4. Funds are transferred. Ensure you have the right funds in your selected bank account prior to placing your order. Your new mFund units will be transferred to your CHESS holdings and you’ll be able to see them in your portfolio.

Why invest in an mFund?

• Easy access. It’s easier to invest in mFunds than other kinds of managed funds as you can access them via online share trading platforms with the same ease that you would invest in shares.
• Portfolio diversity. A managed fund allows you to diversify your investments because it can hold a range of assets and company shares from many sectors in Australia and overseas. Having multiple investments can minimise risk because if one company or sector performs badly, you have many others to fall back on.
• Lower minimal investment. When you invest through the mFund service you sometimes need a lower minimum investment than you would when investing in the managed fund the usual way.
• Professional choice. Building a successful portfolio of stocks and other investments requires a lot of time, research and industry expertise. It’s easy for inexperienced investors to lose a lot of money very quickly. When you invest in a managed fund you can leave those decisions to the experts.
• Your investments are in one place. Because you can invest in mFunds through an online broker, you can easily keep track of all of your investments, including shares, ETFs and managed funds in one place.

What are the risks of investing in managed funds

• You could lose money. The value of a managed fund fluctuates depending on the underlying stocks and other assets. If the fund performs badly, you could get no returns or even lose money on your investment.
• Fees could be higher than returns. mFund portfolio managers charge fees to invest their client’s money. Depending on the decisions they make and how the market performs, your returns may end up being entirely eaten up by fees.
• Single-asset funds. Funds that invest in one type of asset class or sector may be at greater risk of volatility. For example, a commodity fund will do well when the price of its underlying commodities go up but it can also drop quickly as commodity prices fall.
• Cashing in can be harder. Depending on which managed fund you invest in, it may be harder to withdraw your money quickly.
• Fund performance. Whether your investment returns are high, low or going backwards is out of your control. The fund’s managers make all the investment decisions, some of which may not end up benefiting you.
• Lack of transparency. Unlike ETFs, mFunds aren’t required to disclose their underlying investments on a regular basis. This means that you may not have a full picture of what you’re investing in.
• Exchange rates. If you invest in an international fund, you’re exposed to the strength or weakness of the Australian dollar against other currencies.
• Alternative investment methods. Fund managers may invest in potentially riskier assets such as unlisted shares, derivatives or synthetic assets.

Frequently Asked Questions

• What are the best managed funds in Australia?

  The best managed funds in Australia vary depending on your investment objectives, risk tolerance, and time horizon. Some top-rated funds focus on Australian equities, global equities, or fixed income. It is recommended to compare fund performance, fees, and manager reputation before investing.

• How do I buy managed funds in Australia?

  To buy managed funds in Australia, you can invest directly through the fund manager, use an online investment platform like mFund, or go through a financial advisor. Each method may have different fees and minimum investment requirements.

• What are the disadvantages of managed funds?

  The disadvantages of managed funds include management fees, which can reduce your overall returns, and potential underperformance compared to the broader market. Managed funds may also be less flexible than other investment options like ETFs, as they usually have higher minimum investments and less frequent trading opportunities.

• How are managed funds taxed in Australia?

  Managed funds in Australia are taxed based on the income they generate and distribute to investors, including dividends and capital gains. Investors are responsible for paying tax on any income distributed by the fund, and this income must be reported in their annual tax return. Capital gains tax may also apply if you sell your managed fund units at a profit.

• Is a managed investment account a good idea?

  A managed investment account can be a good idea if you prefer a professional to manage your investments according to your risk tolerance and financial goals. These accounts offer personalised investment strategies but typically come with management fees. Consider whether the benefits of professional management justify the costs for your situation.

Written by

Kylie Purcell

Investments analyst

Kylie Purcell is the senior investments editor and analyst at Finder. She has completed a Certificate of Securities and Managed Investments (RG146) and specialises in investment products including online brokers, robo-advisors, stocks and ETFs. See full bio

Kylie's expertise

Kylie has written 134 Finder guides across topics including:

• Investment strategies
• Financial platforms
• Stockbrokers
• Robo advisors
• Exchange traded funds (ETFs)
• Ethical investing
• ASX stocks
• Stock and forex markets