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1301.0 - Year Book Australia, 2003  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 24/01/2003   
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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.

Graph - 26.21 managed funds, consoldidated assets - at 30 June



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
  • 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 - 30 June 2002

Total
Cross invested
Consolidated
Type of institution
$m
$m
$m

Life insurance corporations(a)
199,167
25,673
173,494
Pension funds
360,445
63,494
296,951
Public unit trusts
154,145
22,326
131,819
Friendly societies
6,035
487
5,548
Common funds
7,941
170
7,771
Cash management trusts
29,453
-
29,453
Total
757,186
112,150
645,036

(a) Investments by pension funds which are held and administered by life insurance offices are included under life insurance offices.

Source: Managed Funds, Australia, June 2002 (5655.0).


26.23 MANAGED FUNDS, Consolidated assets

Amounts outstanding at 30 June

2000
2001
2002
Type of investment
$m
$m
$m

Deposits, loans and placements
72,071
76,719
72,670
Short-term debt securities
63,747
62,875
61,061
Long-term debt securities
72,729
66,312
63,445
Equities and units in trusts
197,641
230,899
227,783
Land and buildings
64,237
67,051
70,041
Overseas assets
115,367
120,090
125,285
Other assets
21,214
22,198
24,750
Total
607,006
646,143
645,036

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 2002, $459.3b (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 2002, investment managers invested $150.6b 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 2002

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

Life insurance corporations(a)
199,167
139,009
Pension and approved deposit funds
360,445
182,672
Public unit trusts
154,145
100,569
Friendly societies
6,035
3,002
Common funds
7,941
5,688
Cash management trusts
29,453
28,364
Total
757,186
459,304

(a) Includes both superannuation and ordinary business.

Source: Managed Funds, Australia, June 2002 (5655.0).


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