My question relates to the security of investing in managed funds. With a direct investment in equities one can rely on the regulatory regime imposed by the ASX, but I am not sure that there is a similar regulatory regime in place for managed funds. Indeed it seems that in some situations an investor may be handing over a large sum of money without necessarily knowing where it has been invested. Obviously there is risk attached to any investment and I accept that, but I would like to be sure that there is not also a risk of fraud.
A: Thanks for the question.
There is a regulatory regime for managed funds. It is administered by ASIC under the Corporations Law. In brief:
- Funds can only be offered by Responsible Entities (RE);
- Each RE must have a minimum amount of capital;
- The RE must have an approved compliance plan, (usually with an Independent Compliance Committee);
- Must submit annual returns to ASIC, engage auditors for the compliance plan, have responsible managers etc
While fraud is an issue in any business, I don’t share your concerns about this when it comes to managed funds.
