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1301.0 - Year Book Australia, 2002  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 25/01/2002   
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Contents >> Financial System >> 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 acquire are purchased on behalf of clients. The significant growth in managed funds (graph 26.21) has been a major development in the financial sector over the last decade.





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 comprise the following:

  • life insurance corporations;
  • pension and approved deposit funds;
  • public unit trusts;
  • friendly societies;
  • common funds; and
  • cash management trusts.

Funds of a speculative nature that do not offer 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 26.22 shows their assets by type of institution and table 26.23 shows assets by type of investment.


26.22 ASSETS OF MANAGED FUNDS, By Type of Collective Investment Institution - 30 June 2001

Type of institution
Total

$m
Cross invested

$m
Consolidated

$m

Life insurance corporations(a)
197,814
22,348
175,465
Pension funds
354,713
55,796
298,917
Public unit trusts
143,806
18,748
125,058
Friendly societies
5,967
437
5,530
Common funds
8,203
77
8,126
Cash management trusts
28,693
-
28,693
Total
739,195
97,407
641,789

(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).


26.23 MANAGED FUNDS, Consolidated Assets

Type of investment
30 June 1999

$m
30 June 2000

$m
30 June 2001

$m

Deposits, loans and placements
63,761
69,597
73,337
Short-term debt securities
67,034
63,358
62,545
Long-term debt securities
70,625
72,187
65,758
Equities and units in trusts
152,199
194,105
230,561
Land and buildings
56,754
63,713
69,102
Overseas assets
90,769
115,115
119,142
Other assets
20,150
21,014
21,344
Total
521,291
599,090
641,789

Source: Managed Funds, Australia (5655.0).



Investment managers

A further development within the managed funds industry is the emergence of specialist investment managers. They are employed on a fee-for-service basis to manage and invest in approved assets on their clients' behalf. They usually act for the smaller collective investment institutions such as public unit trusts. They are not accessible to the small investor. Investment managers 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.

A considerable proportion of the assets of collective investment institutions, particularly the statutory funds of life insurance corporations and assets of pension funds, is channelled through investment managers. At 30 June 2001, $483.3b (75% of the unconsolidated assets of collective investment institutions) were channelled through investment managers. Table 26.24 shows the total unconsolidated assets of each type of collective investment institution and the amount of these assets invested through investment managers.

Investment managers also accept money from investors other than collective investment institutions. At 30 June 2001, investment managers invested $126.1b on behalf of government bodies, general insurers and other clients, including overseas clients.


26.24 ASSETS OF MANAGED FUNDS, Invested through Investment Managers - 30 June 2001

Type of fund
Unconsolidated assets of managed funds

$m
Assets invested with investment managers

$m

Life insurance corporations(a)
197,814
146,535
Pension and approved deposit funds
354,713
197,590
Public unit trusts
143,806
102,205
Friendly societies
5,967
3,483
Common funds
8,203
5,463
Cash management trusts
28,693
28,039
Total
739,195
483,315

(a) Includes both superannuation and ordinary business.

Source: Managed Funds, Australia (5655.0).


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