A managed fund is a pool of money that is invested across a range of assets, potentially including shares, government bonds, property and infrastructure. These are handled by professional fund managers who make investment decisions, including the buying and selling of assets, on behalf of the fund and its investors. If you invest in a managed fund your money is pooled with other investors' capital to increase the investment potential of the fund.
Most managed funds include hundreds – and sometimes even thousands – of assets invested in a diverse range of areas, across domestic and international markets. As managed funds are usually so diverse, they are generally seen as fairly low-risk investment options - though there are plenty of options for investors who are happy to take on higher levels of risk in search of greater returns, including geared funds and funds that focus on a particular sector or asset class.
But perhaps the biggest selling point for many investors towards managed funds is that they provide access to a diverse portfolio of assets with minimal effort. Creating the type of portfolio contained in a managed fund requires a lot of time and effort in terms of research and monitoring the market - something a lot of investors would be unable to match.
A downside of professionally managed funds is the cost involved - it’s not uncommon for funds to charge management fees of around 1-2% (and sometimes more) of the cost of your investment. That acts as an anchor on performance and makes it harder for your investments to achieve market-beating returns. There may be other costs too, including contribution and withdrawal fees and adviser fees. On the other hand, an investor in a managed fund will save on the transaction fees associated with buying and selling each asset, which can add up over time.