UNDERSTANDING MANAGED FUNDS
Master Trusts are growing in popularity because of the flexibility they offer investors. They began as a way of offering choice of funds within superannuation but have now evolved to cover all investment area.
There are two basic types of master trusts:
* The discretionary master trust where the master trust operator sets up an investment menu within the trust. This consists of a number of existing products from a wide range of fund managers. With their adviser's guidance, the client constructs their portfolio by selecting different funds from this menu. The master trust operator is responsible for constructing and maintaining the menu of products, trust administration and client reporting. Well-known ones are Navigator and Asgard.
* The fund of funds master trust where the master trust operator establishes generic investment funds within the trust. With the assistance of their adviser, the client constructs their portfolio by selecting from the range of generic funds with names like "growth" "balanced" or "international". The master trust operator is responsible for selecting the various investment managers for each generic fund.
Master trusts offer improved flexibility in the diversification of client funds, improved tax reporting, administration efficiency and low cost switching between funds. Once you invest in a master trust you can switch to new investments whenever you wish at nil or minimal cost.
Wrap accounts are somewhat different. They offer consolidation of all investor information to a single client statement. While investments in master trusts are legally owned by the trustee, investments covered by wrap accounts are owned by the individual investor. Wrap accounts have more flexibility than master trusts as they can cover both managed funds, and direct investments such as property and shares.
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