Question

Briefly explain the reasons why the unit price of an unlisted managed fund is likely to change on a regular basis. In addressing this question reference should be made to the various asset classes, their returns over time, how their returns impact unit price of the fund and also how cash distributions from the fund affect value and unit price of the fund.

Answer 1

If the fund is “unlisted”, new units in managed funds that are still open for investment are issued in line with demand, with a product disclosure statement (PDS). Unlisted funds are valued at least weekly by the fund manager, who divides the net value of the assets on the day by the number of issued units.

When you invest in a managed fund, you are allocated a number of ‘units’. The value of each unit is referred to as the unit price, which is calculated on a daily basis reflecting the value of the fund. If the value of the fund increases, the unit price will rise. Conversely if the value of the fund decreases, the unit price will decline.

A managed fund involves pooling together money from different investors into one fund that is invested and controlled by a professional investment manager. Funds differ in the types of assets you can invest in. You can invest in a single asset class such as shares or fixed interest, or a multi-sector option such as a Growth or Balanced fund, which contain a mix of different asset classes.