Australian small business owners, entrepreneurs and aspiring investors are increasingly choosing to invest in managed property funds.
Managed property funds offer a range of benefits, such as diversification opportunities and access to higher grade investment assets. They can be suitable both for investors just starting out who are looking for a less risky, less expensive way to start investing, and for those looking to expand their portfolios.
What are managed property funds?
Managed property funds are an investment structure whereby multiple investors who share similar investment goals pool their capital, allowing each to invest a share of money into the fund. This allows individual investors to gain exposure to a quality asset at a fraction of the cost compared to investing independently.
A professional fund manager oversees the pooled capital, strategically investing it in properties that align with the collective goals of all investors. This ensures that the funds are directed toward investments that meet the group’s objectives, while each investor receives their proportional share of the cash flow generated by the fund’s assets.
How do managed funds work?
Managed funds issue units to investors upon their investment, with each unit representing the investor’s stake in the fund. The number of units allocated reflects the investor’s proportional share of the fund’s overall value.
These funds are managed by professionals who will work to minimise risks and maximise investor returns. A good property manager will constantly optimise fund performance to ensure you always get the most out of your investment.
These investments can range from single assets to blended investments with a value-add focus. They can include commercial assets- such as office, retail or industrial spaces – or residential properties, such as townhouses or apartments.
Small business owners are increasingly opting to invest through managed property funds, as they offer new opportunities for earning capital and increasing cashflow, which they can then use to further expand their businesses.
Why are Australians investing in managed property funds?
Managed funds provide investors with access to high-quality property investment opportunities across Australia. These opportunities focus on delivering regular income returns and capital growth.
More and more Australians are investing in managed property funds due to the wealth of benefits they can provide. Here are 11 benefits to investing in managed property funds you may not have thought of.
1. Build wealth and secure finances
Building wealth through managed property funds enables investors to create a steady stream of income and achieve long-term financial stability. By pooling resources with other investors, individuals can access high-quality property assets that may have been out of reach otherwise.
Over time, this shared investment approach can lead to significant returns, allowing investors to grow their wealth while minimising their risk. The professional management of these funds ensures that capital is strategically invested, providing a reliable pathway to financial security and peace of mind. Whether planning for retirement or building a financial safety net, managed property funds offer an efficient way to achieve these goals.
2. Access to a broader range of investments
Managed property funds allow investors to pool their money with other investors to increase their capital, giving them access to more investment opportunities they may be out of reach as individual investors. This grants investors access to new markets and strategies that would usually rely on higher capital buying power.
3. Tax benefits
Filing tax doesn’t have to be a burden when investing in property. Property investment and property funds come with significant tax benefits alongside their wealth-building advantages. Managed funds do not generally pay tax. Investors may have to pay tax on distributions at marginal tax rates, which is often countered by tax benefits such as depreciation deductions, interest expense deductions, negative gearing, and the ability to claim losses from previous years. However, it is always advisable to seek advice from a finance professional, such as an accountant.
4. Passively buying into the market
Investing in a managed property fund allows investors to passively buy into the market as they can benefit from the expertise of professional fund managers who handle the complexities of property acquisition, management, and maintenance.
Property funds enable investors to easily get started on their investment journey since the initial investment cost of a shared fund is significantly smaller than directly purchasing an entire
property. Additionally, these funds provide access to diversified property portfolios, reducing risk while offering the potential for steady returns without the need for hands-on involvement.
5. Let the professionals manage your money
Fund managers bring valuable expertise and strategic insight to managed funds, significantly improving the likelihood of success.
With their vast knowledge of market trends, asset valuation and risk management, they are able to identify high-quality investment opportunities that align with the fund’s objectives.
Their experience enables them to make informed decisions, adapt to market fluctuations and manage the fund with precision — ultimately minimising risks while maximising returns.
6. Readily available information
Since the fund is managed by a professional, investors should be able to conveniently access updates and current information on the fund’s performance, including account balance, transaction history, investment performance, and unit prices.
7. Expand your network
Managed property funds not only give investors access to new wealth, but they can also provide opportunities to create new contacts and expand your network. This enables the building of long-term partnerships that can grow and evolve as investors explore the opportunities that come with investing in property funds.
8. Lower initial costs
As investors with managed property funds share their investment costs with other unit holders, the entry cost tends to be lower than directly buying shares individually. This allows investors to save money on the initial investment while still earning significant capital from the fund.
9. Diversify your portfolio
Property funds enable investors to diversify their portfolio across a range of different sectors, markets, areas, and classes that would otherwise be more difficult to gain access to.
10. Reduced risk
Investing in a managed property fund, rather than directly in property, allows investors to generate a positive cashflow with reduced risk. Since the fund diversifies the pooled capital across multiple properties and investment opportunities, the impact of any single underperforming asset is minimised. If one investment experiences a decline in value, other
high-performing assets within the portfolio can offset the loss, offering greater stability and potential for overall returns.
11. Investor protection
Australia has strict laws to protect investors and consumers of financial services and products. Managed investments operated by a responsible entity, therefore, protect investors’ interests.
Managed funds: A smart strategy for small business owners
Managed real estate funds offer an accessible and potentially lucrative pathway for individuals or businesses looking to diversify their investment portfolios while benefiting from professional management and shared risk.
When choosing a managed investment fund, it’s always important to consider factors such as your risk tolerance, desired return type, fund costs and objectives, and the time horizon for accessing your investment. These considerations will help ensure the fund aligns with your financial goals and investment strategy.
With that in mind, managed funds can be a highly profitable venture, and can be especially ideal for inexperienced investors, small business owners or entrepreneurs to start generating a passive income.
“The opinions expressed by BizWitty Contributors are their own, not those of BizCover and should not be relied upon in place of appropriate professional advice. Please read our full disclaimer."
