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1301.0 - Year Book Australia, 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 07/02/2008   
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Contents >> Financial system >> Managed funds

MANAGED FUNDS

The term 'managed funds' is used loosely in the financial community to embrace two broad types of institutions. The first are collective investment institutions (such as life insurance companies) which buy assets on their own account. The second are investment or fund managers which act as investment agents for the collective investment institutions, as well as others with substantial funds to invest. Investment managers have relatively small balance sheets because most of the assets they manage are purchased on behalf of clients. The managed funds consolidated assets (graph 27.22) represents assets of collective investment institutions only. The significant growth in managed funds during the period 2003-07 was due to several influences, the main ones being a relatively buoyant stock market and changes to superannuation legislation designed to attract investor funds.

27.22 Managed funds consolidated assets, by type of institution - 30 June
Graph: 27.22 Managed funds consolidated assets, by type of institution—30 June

The managed funds industry is a difficult one to measure because of the large amounts of financial interaction between collective investment institutions and fund managers, and between fund managers themselves. Consequently, double counting of funds which are 'churning' through the system is a difficulty which needs to be addressed in order to derive a true measure of the funds management industry. One approach is to take the consolidated assets of collective investment institutions (as given in graph 27.22), add to it those funds managed on behalf of other clients such as governments, corporations, charities, overseas clients and 'net-off' funds sourced from other fund managers. Table 27.23 provides this measure of the total funds management industry.

27.23 MANAGED FUNDS INDUSTRY, Total funds under management - 30 June

2005
2006
2007
$m
$m
$m

Total consolidated assets of collective investment institutions
910 751
1 092 480
1 334 673
plus
Total FUM of investment managers sourced from Australian entities other than collective investment institutions(a)
244 164
274 909
314 337
plus
Total FUM of investment managers sourced from overseas(a)
32 861
42 900
59 590
less
Total FUM of investment managers sourced from other investment managers(a)
37 472
27 589
30 250
Total
1 150 304
1 382 700
1 678 350

(a) Total funds under management.
Source: Managed Funds, Australia (5655.0).



Collective investment institutions

As the name implies, collective investment institutions pool the funds of many small investors and use them to buy a particular type, or mix, of assets. The asset profile can be structured to satisfy individual investor requirements regarding, for example, the degree of risk, the mix of capital growth and income, and the degree of asset diversification. Collective investment institutions in ABS statistics comprise the following:

  • life insurance offices
  • superannuation funds and approved deposit funds
  • public unit trusts
  • friendly societies
  • common funds
  • cash management trusts.

Funds of a speculative nature that do not offer sufficiently liquid redemption facilities - for example, agricultural and film trusts - are excluded.

To derive the total assets of collective investment institutions in Australia on a consolidated basis, it is necessary to eliminate the cross investment between the various types of institution. For example, investments by superannuation funds in public unit trusts are excluded from the assets of superannuation funds in a consolidated presentation.

Although statistics for each of these institutions were presented earlier in this chapter, the accompanying tables summarise their consolidated position (i.e. after the cross investment between the institutions has been eliminated). Table 27.24 shows their assets by type of institution.

27.24 ASSETS OF MANAGED FUNDS - 30 June 2007

Unconsolidated assets
Cross invested assets
Consolidated assets
Type of institution
$m
$m
$m

Life insurance offices(a)
263 740
39 193
224 546
Superannuation funds
933 400
152 665
780 735
Public unit trusts
300 648
33 668
266 980
Friendly societies
7 185
2 940
4 245
Common funds
12 093
672
11 421
Cash management trusts
46 745
-
46 745
Total
1 563 811
229 138
1 334 673

- nil or rounded to zero (including null cells)
(a) Investments by pension funds which are held and administered by life insurance offices are included under life insurance offices.
Source: Managed Funds, Australia (5655.0).



Investment managers

Investment managers are employed on a 'fee-for-service' basis to manage and invest in approved assets, on their clients' behalf. They provide a sophisticated level of service, matching assets and liabilities. They act in the main as the managers of pooled funds, but also manage clients' investments on an individual portfolio basis. Investment managers offer their services to a range of clients, including superannuation funds, life insurance offices, corporations and high net worth individuals.

A considerable proportion of the assets of collective investment institutions are managed via investment managers. At 30 June 2007, $852.1b (64% of the unconsolidated assets of collective investment institutions) were channelled through investment managers. Investment managers also accept money from investors other than collective investment institutions. At 30 June 2007, investment managers invested $373.9b on behalf of government bodies, general insurers and other clients, including overseas clients.

Table 27.25 shows the total unconsolidated assets of each type of collective investment institution, and the amount of these assets invested through investment managers.

27.25 ASSETS OF MANAGED FUNDS, Invested through investment managers - 30 June 2007

Total unconsolidated assets
of managed funds
Assets invested with
investment managers
Type of fund
$m
$m

Life insurance corporations(a)
263 740
148 017
Pension and approved deposit funds
933 400
529 078
Public unit trusts
300 648
127 018
Friendly societies
7 185
2 096
Common funds
12 093
4 033
Cash management trusts
46 745
41 880
Total
1 563 811
852 122

(a) Includes both superannuation and ordinary business.
Source: Managed Funds, Australia (5655.0).

27.26 LENDING COMMITMENTS OF FINANCIAL INSTITUTIONS

2004-05
2005-06
2006-07
Type of lending activity
$m
$m
$m

Housing finance
135 013
157 415
173 749
Personal finance
73 130
74 949
80 061
Commercial finance
309 472
370 122
453 779
Lease finance
6 308
6 848
6 325
Total
523 923
609 334
713 915

Source: Lending Finance, Australia (5671.0).

27.27 LEASE FINANCE COMMITMENTS,
By type of lessor

2004-05
2005-06
2006-07
$m
$m
$m

All banks
2 219
2 409
2 224
Finance companies
1 275
np
1 034
General financiers
1 706
1 956
1 678
Other(a)
1 108
np
1 389
Total
6 308
6 848
6 325

np not available for publication but included in totals where applicable, unless otherwise indicated
(a) Includes money market corporations.
Source: Lending Finance, Australia (5671.0).





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