Your guide to Managed Funds.

Transcription

1 Your guide to Managed Funds.

2 An introduction to Managed Funds 1 Investing in Managed Funds 2 Key benefits 6 Risks 7 The Citibank advantage 8 About Citigold 11

3 An introduction to Managed Funds There s a whole world of investments to choose from. Citibank makes it easy. With our global reach, Citibank offers you a broad selection of quality managed funds based here in Australia and internationally. Take the opportunity to invest across cash, bonds, property, equities, and alternatives confident in the knowledge that investment experts are managing your money. Managed funds offer a simple way for investors to access a variety of investment markets some of which are not readily available to ordinary investors. Your money is managed by investment professionals, making this a hassle free investment option that brings diversity and the potential for healthy returns to your portfolio. In many cases only a small initial investment is required to get started. Managed funds may be operated by large financial institutions or by smaller boutique asset management businesses. All the managed funds offered by Citibank are researched by our team of analysts, and only those fund managers with experience and a reputation for excellence are offered by us. It s all part of our commitment to help you make the most of your managed investments. Any advice is general only and may not be suitable for you. Citigroup Pty Limited ABN AFSL ( Citibank ). An introduction to Managed Funds 1

4 Investing in Managed Funds Managed funds are investment vehicles which allow many different investors to pool their money into a fund which is managed by a professional fund manager. Managed funds are traditionally set up as unit trusts. The ownership stake for each investor is represented by the number of units held. When you initially invest in a managed fund, you are allocated a number of units based on the amount you invest and the current unit price. The unit price reflects the value of the fund s investments. As the value of the investments rise and fall, so does the unit price. How do managed funds work? When you have selected the fund(s) that are right for your goals, you make an initial investment into the fund. The fund manager pools your money with that of other investors, to invest in line with the fund s overall goals. For example, a managed Australian share fund will invest your money across publicly listed companies on the Australian Securities Exchange. The funds may pay regular distributions. These distributions will normally be comprised of ongoing income returns plus realised capital gains, if any. The fund manager will provide an annual statement illustrating these components for tax purposes. All or part of your investment can normally be redeemed at any time. 2 Investing in Managed Funds

5 Types of Managed Funds There are different types of managed funds depending on: The type of assets they invest in Managed funds can invest in a variety of asset classes including cash, fixed interest, property, international and Australian shares, and alternatives. Some managed funds invest in one asset class while others invest across multiple asset classes. The investment strategy they employ Fund managers also adopt a range of different investment strategies. Some examples include: Index funds these fund managers aim to replicate the performance of a particular financial index e.g. ASX 200 Actively managed funds these fund managers aim to deliver higher than benchmark returns by taking overweight and underweight positions in certain assets when compared with the particular benchmark Absolute return funds these fund managers aim to deliver consistent returns regardless of market direction. They tend not to follow a benchmark and can use a range of strategies to generate positive returns. The ownership of the asset management business Managed funds may be operated by large financial institutions or by smaller boutique asset management businesses. Investing in Managed Funds 3

6 Case study Scott and Belinda (both 32) have just had their first child Jasmine. They are keen to set some money aside to fund a quality secondary school education for their daughter. They have both acquired some shares over the years, some of which have done well, some of which haven t. They both acknowledge, however, that neither have the time in their busy lives to do sufficient research into companies to guide their future stock purchases, particularly now that Jasmine takes up much of their time. Reviewing their situation with their Relationship Manager, the couple decide they want to invest into a managed fund of Australian shares as a long term investment with the goal of growing a nest egg over the next decade. They want to benefit from the insights of a professional manager, as well as the diversification available through a managed fund. Scott and Belinda realise they will pay annual fees on their chosen fund but they believe this is money well spent as they would prefer to spend time watching their daughter grow instead of researching the market. With the help of their Relationship Manager, Scott and Belinda review a number of Australian equity funds on Citibank s Approved Product List, finally settling on a fund offering low fees, an investment strategy they are comfortable with, and a history of outperforming similar funds. * * Past performance is not a reliable indicator of future performance. 4 Investing in Managed Funds

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8 Key benefits Like all investments managed funds involve benefits as well as risks, and these vary according to the type of fund you select. Access to a professional fund manager Rather than you as an individual researching companies and investment opportunities in your spare time, a fund manager and their team work entirely on researching opportunities, and making and monitoring their investment decisions. Diversification A key advantage of managed funds is the diversification they provide investors can minimise the risk of any single security or asset underperforming by investing in a managed fund. As an example an individual investor might have 10 stocks in their portfolio. If one of those companies performs badly, it will have a significant impact on the performance of the investment. A managed fund will typically have 40, 60, or maybe even 80 stocks in their portfolio, and as such be taking on far less individual company risk. No issuer risk When you buy a managed fund you are not taking on the credit risk of the fund manager. The assets of the fund are held by the Responsible Entity or Trustee. In the event of the fund manager becoming insolvent, those assets sit inside the trust and are not on the fund manager s balance sheet. 6 Key benefits

9 Risks Market risks The major source of risk and volatility with managed funds comes from the underlying assets held by the fund. If for example the ASX 200 drops by 10% over the course of 12 months, then an Australian equity fund will typically fall by a similar amount (it may fall less or more than 10% depending on the skill and strategy of the fund manager). Liquidity risks Managed funds are relatively liquid with most funds providing daily pricing and liquidity. In times of severe economic downturns, however, funds can reduce this liquidity, and potentially even freeze all redemptions for a period of time, so as to protect the holdings of the fund and not disadvantage investors who wish to stay invested. Key person risks The performance of the fund may be affected by the skill or reputation of the fund manager. This may give rise to key person risks should the particular fund manager leave the organisation. Fees The fees charged for the services of a fund manager mean that managed funds sometimes have higher fees than direct investments. Risks 7

10 The Citibank advantage Citibank offers you the opportunity to invest in a range of high quality managed funds. Together with our external research house Mercer, our dedicated investment specialists research fund managers across the market to identify funds that we believe have key competitive advantages. The result of this research process is that our highly rated managers have a strong track record of benchmark outperformance. More broadly, Mercer has measured the value added by all of its A rated managers versus their relevant benchmarks. Since inception of respective ratings, these managers have added value across 95% of the asset classes and sectors that are covered. On the opposite page is a graph that illustrates this outperformance. 8 The Citibank advantage

11 Value added since asset rating inception (% p.a.) to 31 December 2012 Australian Equity, Small Cap 8.2% UK Equity, Small Cap 5.3% Trans-Tasman Equity Pacific ex Japan Equity US Equity, SMID Core World ex US Equity, Small Cap Emerging Markets Debt Japan Equity Emerging Markets Equity US Equity, Small Cap Core US Equity, Small Cap Value US Real Estate, Securities International Fixed, Global Broad Market Aggregate Global Equity, Value Global Equity, Core US Equity, Mid Cap Growth US Fixed, Long Australian Equity International Fixed, Global Sovereign US Equity, Small Cap Growth Europe ex UK Equity UK Equity UK Fixed Inflation-Linked Bonds Canadian Equity US Equity, Large Cap Growth US Equity, Mid Cap Core Australian Fixed US Equity, Mid Cap Value US Equity, Large Cap Core Global Equity, Growth Japan Equity, Small Cap 4.0% 3.7% 3.6% 2.9% 2.8% 2.3% 2.1% 2.0% 1.9% 1.7% 1.5% 1.5% 1.3% 1.3% 1.3% 1.3% 1.3% 1.2% 1.0% 0.9% 0.5% 0.5% 0.5% 0.5% 0.3% 0.2% 0.2% 0.1% -0.4% -2% 0% 2% 4% 6% 8% 10% The Citibank advantage 9

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13 About Citigold Our relationship with you At Citigold, we understand your financial success isn t a matter of chance; it s in the planning. We work with you to help you reach your financial goals. Your Relationship Manager opens the door to the world of opportunity that Citigold can offer and, working with a team of specialists, ensures your plans reflect your investment and lifestyle goals. With our global reach, we offer quality investment opportunities within Australia and around the world. Our team of specialists can provide you with expert advice to help you make informed, strategic financial decisions about your investments. Types of financial advice for products and services We offer flexibility and choice on the type of advice you can access to suit your individual circumstances and wealth requirements. Client directed: make your own financial decision without any advice from Citibank. Any decisions you make will be communicated to Citibank to execute your request only. General advice: we will provide you with the product information, product research or market views to help you make your own financial decisions. You do not need, or want, specific recommendations or advice that takes into account your personal circumstances, financial situation or objectives. Personal advice: we will provide you with specific recommendations or advice that takes into account your personal circumstances, financial situation or objectives. About Citigold 11

14 Important information This material is made available by Citigroup Pty Limited ABN AFSL ( Citibank ). Any advice is general advice only. We have not considered your objectives, financial situation or needs. You should consider if the advice is appropriate for your situation. You should also obtain and consider the relevant Product Disclosure Statement before you make an investment decision. This material is for general information only. All opinions and estimates constitute Citibank s judgement as of the date of this material and are subject to change without notice. This information is taken from sources which are believed to be accurate however Citibank accepts no liability of any kind to any person who relies on the information contained in this material. Investors are advised to obtain independent legal, financial, and taxation advice prior to investing. Some investment products are not available to US people and may not be available in all jurisdictions. Investments are not deposits or other obligations of, guaranteed, or insured by Citibank N.A., Citigroup Inc., or any of their affiliates or subsidiaries, or by any local government or insurance agency, and are subject to investment risk, including the possible loss of the principal amount invested. Investors investing in funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past performance is not a reliable indicator of future performance Citibank. Citibank, Citi, and Arc Design are service marks of Citigroup Inc.

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16 Contact Citigold today: Visit a branch About Citigold: Visit citibank.com.au/citigold Use your Smartphone to download a QR code reader and scan this code to find your local branch or visit findmyciti.com/au/ MCG14677_(0613)