Why the unit price of an unlisted managed fund is likely to change on a regular basis

What is the difference between an unlisted fund and a listed fund?

Listed funds are listed or quoted on the ASX (or other exchange) and issue investors with securities (which are just like shares) that can be traded at any time through a stock broker. Unlisted funds (including unlisted property funds or property syndicates) issue you with units (as they are a managed fund). Unlisted Fund Units are not quoted on any exchange and cannot be traded at any time. They are normally held for the duration of the investment (e.g. 5, 7 or 10 years).

Índice Show

What is the difference between an unlisted fund and a listed fund?
How unit pricing works
How do distributions affect unit prices?
Can risk impact the value of my investment?
What are the advantages of unlisted funds over listed funds?
What is the difference between a listed and unlisted managed fund?
What is an unlisted managed fund?
How do you calculate unit price for a managed fund?

As listed funds are traded on the stock market on a daily basis, their value can be subject to significant volatility (price fluctuations) driven by perceptions about what the underlying assets are worth along with general market sentiment.

The assets of a listed property fund are normally Retail shopping centres, Office towers or Industrial properties (logistics sheds etc.). They can however include other types of properties including child care centres, medical clinics and hospitals, hotels and residential properties.

Unlisted property funds will generally hold a single asset (these are often referred to as “property syndicates”), or a set number of assets. For example a single shopping centre or a group of shopping centres as a set portfolio. These unlisted property fund types are called “closed ended” funds as they will generally only issue units once to investors to secure a property investment.

Some unlisted property funds will be “open-ended” funds which means the property fund can continue to issue units and acquire new properties as time goes on. These unlisted property funds will have no set term and instead will continue to grow.

Unlisted funds (including unlisted property funds) will not fluctuate in price the way listed shares do due to the fact that people are not trading the units on a daily basis like shares. Generally the underlying properties of the fund are valued once per year (due to the fact that they are large pieces of real estate) so do not display the same level of volatility as listed property funds.

When you invest in a managed fund, you are actually buying a number of equally valued ‘units’ in that fund. The value of these units will constantly fluctuate, depending on factors like how well the investments held by your fund perform, or if the assets held are creating income. The total value of a fund’s assets, before fees and other costs, is called the Net Asset Value (NAV), and is typically calculated on a per unit basis.

How unit pricing works

Unit prices typically change daily, with their day-to-day value measured in three steps.

The total market value of all of a fund’s assets is calculated,
The amount is adjusted for any liabilities (fees and expenses), then
The total fund value is divided by the number of units held by investors.

The number of units you own in the fund remains constant (unless you buy or sell) – it’s just the price of each unit that changes.

For example, let’s say you invest $10,000 in a managed fund with a current unit price of $1.00. You will now own 10,000 units in that fund. Now, imagine the total size of this fund $100million – and over three years the total fund’s value grows 20% to $120million (with the same number of total units). The unit price will now be 20% higher: $1.20. You will still own 10,000 units – but your investment is now worth $12,000.

Of course, this is a positive scenario and in some years, it’s possible the Fund’s unit price will fall – decreasing the value of your initial investment. The unit price simply reflects the value of the managed fund’s investments, which will always rise and fall according to the market value of the fund’s portfolio. Fund unit prices will also usually fall after a distribution period – but that’s not a bad thing. In fact, it means you’re receiving income (along with your fellow investors).

How do distributions affect unit prices?

Over any given year, your managed fund will earn income in the form of dividends and interest. It may also make profit on investments sold. Australian tax law dictates that all income and realised capital gains must be paid out to investors as ‘distributions’ – which means you’ll receive a payout monthly, quarterly, or half-yearly depending on your chosen fund’s arrangement. When a fund pays out these distributions the total assets of the fund will fall by the total amount that is paid to investors, generally decreasing the total Net Asset Value of the fund and the unit price by a proportionate amount.

What you do with your distribution is up to you. You may choose to:

Reinvest your distribution

Some investors choose to automatically reinvest their distributions back into the fund and purchase additional units.

This generally means their total investment is worth a similar amount after the distribution as it was immediately before the distribution, i.e. they now hold more units in the fund but the fund’s unit price has decreased.

Take your distribution as cash

Other investors prefer to receive their distributions directly into their bank account, so they can decide where they’d like to spend or reinvest their money. These investors will get the benefit of the additional payment right away, but without additional units in the fund, their total value will generally decrease as the fund’s unit price decreases.

What about fees?

Fund managers usually charge a fee for their expert services – but these fees will vary depending on the level of management required as well as the type of managed fund. The unit price of a managed fund is calculated net of all fees and liabilities however, so there is no need to try to factor these in yourself.

Can risk impact the value of my investment?

It’s important to remember that the value of your investment may be impacted by different risks. Securities that are listed on share markets can be affected for a number of reasons including how well they perform, their strategy and management, how sustainable their earnings are – plus much more. And don’t forget: if your managed fund portfolio includes assets outside Australia, other factors (such as exchange rates) may also impact your investment returns. Make sure you fully read all disclosure documents, including the PDS, and understand the risks associated with a managed fund and it’s underlying investments prior to investing. If you don’t understand them, seek advice or ask the fund manager for more information.

What are the advantages of unlisted funds over listed funds?

Unlisted fund can also provide a steady form of income compare to listed funds as they have long term contracts in place with counterparties giving investors certainty with income. There is less liquidity with unlisted funds. Investors are required to submit a redemption request to the fund to redeem their units.

What is the difference between a listed and unlisted managed fund?

What is an unlisted managed fund?

Unlisted managed funds – most managed funds are not listed on an exchange. You buy units or shares in the fund by sending an application form to a fund or by visiting the ASX's mFund service. Listed managed funds – you can buy and sell units or shares in the fund on an exchange, such as the ASX.

How do you calculate unit price for a managed fund?

A unit price is calculated as: The total market value of the assets in each investment plan DIVIDED BY. The number of units held in that investment plan.