The term 'managed funds' is used freely in the financial community to embrace two broad types of institutions. The first are managed funds institutions (such as life insurance companies, superannuation funds and unit trusts) which buy assets on their own account. The second are fund managers which act as investment agents for the managed funds institutions, as well as others with considerable funds to invest. Investment managers have comparatively small balance sheets because most of the assets they manage are purchased on behalf of clients. The growth in the assets of superannuation funds between 2006 and 2007 coincides with changes to superannuation legislation in June 2007 designed to attract investor funds. The decrease in the assets of managed funds from 2007 to 2009 chiefly reflects fluctuations in the stock market, mainly as a result of the global financial crisis which began in late 2007.
The managed funds industry is difficult to calculate because of the large amounts of financial communication between managed funds institutions and fund managers, and between fund managers themselves. Consequently, double counting of funds which are churning through the system needs to be addressed in order to obtain a true measure of the funds management industry. One approach is to take the consolidated assets of combined investment institutions, 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 domestic fund managers.
Managed funds institutions pool the funds of many small to medium investors and use them to buy a particular type of assets. The asset profile can be planned to satisfy individual investor requirements.
To derive the total assets of each type of managed funds institution in Australia on a consolidated basis, it is necessary to remove 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.
Investment administrators are employed on a 'fee-for-service' base to handle 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, government entities and high net worth individuals.
A considerable proportion of the assets of managed funds institutions are managed via investment managers. At 30 June 2009, $691.0b (57% of the consolidated assets of managed funds institutions) were channeled through investment managers. Investment managers also accept money from investors other than managed funds institutions. At 30 June 2009, investment managers invested $309.8b on behalf of government bodies, general insurers and other clients, including overseas clients.