The main difference between a managed fund and a listed fund lies in how they are structured, how they operate, and how investors buy and sell units in them. Here’s a breakdown of the key differences:
1.Structure
Managed Fund: A managed fund is typically an unlisted investment vehicle, where the fund manager pools money from investors to invest in a variety of assets (e.g., stocks, bonds, real estate). Investors in a managed fund buy and sell units directly from the fund, and the value of these units is determined by the net asset value (NAV), which is calculated at the end of each trading day.
Listed Fund: A listed fund is a fund that is listed on a stock exchange, like the Australian Securities Exchange (ASX). These funds can be traded throughout the day, much like individual stocks. The fund’s units or shares are bought and sold on the exchange, and the price of the shares fluctuates during trading hours based on supply and demand.
2.Liquidity
Managed Fund: Generally less liquid because investors can only buy or sell units at the end of each trading day at the NAV, and they usually need to process through the fund manager.
Listed Fund: More liquid, as shares of the fund can be bought or sold anytime during market hours, just like regular stocks, at the prevailing market price.
3.Pricing
Managed Fund: The price of units is determined by the NAV, which reflects the total value of the underlying assets in the fund. This NAV is typically calculated once per day.
Listed Fund: The price of the fund’s shares is determined by the market through supply and demand on the stock exchange. This price may fluctuate throughout the day and may differ from the NAV, sometimes trading at a premium or discount to the NAV.
4.Investment Flexibility
Managed Fund: Investors typically cannot directly trade units, and it may be more difficult to access information on the fund’s real-time performance. Also, the fund manager has greater control over the investment process.
Listed Fund: Investors have the flexibility to buy or sell units in real-time on the stock market. This allows for greater flexibility, especially for those wanting to make quicker investment decisions or trade frequently.
5.Management Style
Managed Fund: Managed funds often involve active management, where a fund manager makes investment decisions on behalf of the investors. However, there are also passive managed funds that follow an index.
Listed Fund: Listed funds can also be actively or passively managed, but because they are traded on an exchange, they tend to have a more flexible structure that may include exchange-traded funds (ETFs) or closed-end funds.
6.Costs
Managed Fund: Typically, managed funds have higher fees due to the active management and administrative costs involved. These costs include management fees, performance fees, and sometimes entry or exit fees.
Listed Fund: Costs for listed funds can vary, but generally, they tend to have lower ongoing management fees than traditional managed funds. Listed funds may also have brokerage fees or bid-ask spreads associated with buying and selling on the exchange.
In summary:
Managed Fund: Unlisted, bought/sold at NAV once a day, less liquid, can have higher fees.
Listed Fund: Listed on an exchange, traded like a stock, more liquid, price fluctuates throughout the day.
Lauren Hua is a private client adviser at Fairmont Equities.
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