The mFund Settlement Service is ideally suited for retail investors who invest in managed investment schemes and want the benefits of electronic settlement and consolidated reporting. It is expected that the first adopters will be investors who already have a stockbroking relationship in place to access ASX investment products such as shares. This group mainly comprises self-directed investors, SMSF trustees and financial advisers to these groups.
All mFund products are unlisted managed funds. Being ‘unlisted’ means that they are not directly traded on ASX. Instead, purchases and sales of units in the fund are made between the investor and the managed fund Issuer’s unit registry. Investors do not trade units with other investors; rather, the process is facilitated by a settlement system (CHESS) owned by ASX. The price of units is set by the fund manager and not on a traded market, as is the case in share transactions.
Unlisted managed funds are the most common type of managed fund available to Australian investors. There are more than 2,000 unlisted managed funds offered in Australia. They are typically actively managed by professional fund managers, who pool funds from a range of investors. Pursuing specialised strategies, unlisted managed funds provide a cost-effective way for investors to gain exposure to asset classes that they may lack the resources or expertise to access individually or cost effectively.
ETF stands for ‘exchange-traded fund’. Investors can buy and sell units in these funds through ASX. In this way, they may appear similar to mFund products. However, there are two key differences. First, the units in ETFs are quoted on ASX and are traded directly between buying and selling investors via their brokers. Second, the underlying funds are typically not actively managed. Instead, they track an index or benchmark (such as the S&P/ASX 200 index) or a commodity (such as gold).
Shares are direct interests in the equity of a specific company or other entity. This is the most common product listed and traded on ASX. Shares are commonly the underlying product held by unlisted managed funds and ETFs.
| mFund Settlement Service | Trading ETFs on the ASX | Trading shares on the ASX | |
|---|---|---|---|
| What is it for? | Unlisted managed funds (typically actively managed) | Managed funds quoted on the ASX (typically passively managed) | Shares |
| What is it? | It is a service which allows investors to buy and sell managed funds directly with the fund managers via brokers. | It is a system which allows investors to buy and sell ETFs (trade) directly with other investors via their brokers. | It is a system which allows investors to buy and sell shares (trade) directly with other investors via their brokers. |
| Are the managed funds / shares listed (quoted) on a stock exchange? | No | Yes (quoted) | Yes (listed) |
| What is ASX’s role? | The role of ASX is to provide a settlement service only. | ASX operates the stock exchange, where buying and selling investors trade with each other. | ASX operates the stock exchange, where buying and selling investors trade with each other. |
| How do investors buy the investment? | The investor buys the units through the broker. The units are sold by the fund manager. | Investors buy from other investors on the stock exchange | Investors buy from other investors on the stock exchange |
| Are investors able to trade with other investors? | No | Yes | Yes |
| How do investors sell the investment? | The investor sells the units through the broker. The units are bought by the fund manager. | Investors sell to other investors on the stock exchange. | Investors sell to other investors on the stock exchange. |
| Does ASX guarantee investment performance? | No, as is the case with other managed fund investments which are not traded on the stock exchange. | No, as is the case with any investment in ETFs. | No, as is the case with any investment in shares. |
At launch, the www.mfund.com.au site will feature unlisted managed funds from a broad range of leading managed fund issuers. All mFund products will be accompanied by a PDS outlining related features, benefits and risks.
ASX has launched the mFund Settlement Service in conjunction with 65 leading financial services organisations, including leading fund managers and responsible entities, unit registrars and administrators, and a number of ASX brokers.
As with all unlisted managed funds, the price of units is set by the fund manager.
Once the investor has successfully bought units in an mFund, they will receive a welcome letter or pack from the issuer. This will confirm the details of their investment, including the number of units purchased, the price paid and other details specific to the mFund product, such as whether there is an option to reinvest distributions.
Once the mFund Settlement Service is operational, you will be able to see the current price of units in an mFund product at any time at www.mfund.com.au. Stockbrokers are also expected to make pricing information available through their own portfolio management systems.
Announcements relating to mFund products will be released through ASX’s regular market announcements service. From time to time, you will also receive communications directly from mFund issuers with information such as details of distributions.
Whenever there is a change in the number of units you hold in an mFund, ASX issues a CHESS statement confirming your unit holding. These statements are issued at the end of each month.
Contact your stockbroker or adviser
A brochure outlining the mFund Settlement Service is available to download.
The mFund Settlement Service fact sheet is available to download here.