Managed Funds FAQs: What & How To - RaboDirect

A managed fund is simply a type of investment where a number of investors pool their money into one fund which is then invested by an experienced fund manager. A managed fund can invest in a wide variety of assets including equities, property and government bonds. This combination of different types of assets aims to reduce the overall level of risk your investment is exposed to while working to deliver excellent capital growth over the long term.

RaboDirect offers over 40 managed funds covering the main asset classes (or a combination):

• Cash (e.g. a RaboDirect savings account)

• Fixed Interest (e.g. a loan to the government or a large company) 

• Property (e.g. residential or commercial property)

• Equities (e.g. shares in companies) 
  

• Check out our range of managed funds

If you are interested in investing but do not have the time, resources or energy to research and track all the different investments out there then managed funds could be right for you. The key benefits of investing in managed funds are:

• Diversification: Managed funds enable you to invest in a diversified portfolio of investments beyond what most investors could achieve themselves. From as little as $250, these investments may be spread across single or multiple asset classes, reducing the volatility of the overall investment and the impact of a fall in the value of any one asset.

• Professional Money Management: Pooling funds with other investors allows a fund manager to spread the investment mix, which helps lower investor risk. Additionally, the pooling of investors funds allows the fund manager to invest beyond the financial capability of the individual investor. The fund managers will constantly research and monitor investment markets to find the best opportunities.

• Performance: Managed funds offer the potential to earn returns above the market benchmark of each respective asset class. With a team of professional investment managers constantly looking for the best opportunities, a fund can offer you the potential to earn returns superior to what an individual investment manager might be able to achieve on their own.

• Liquidity: You can normally get access to your money whenever you like.

• Convenience: It takes time to manage a diversified portfolio of investments. You need to research the market, implement transactions and consult with stockbrokers, accountants, tax specialists etc. A fund manager can undertake all the necessary management tasks on your behalf.

• Economies of Scale: As managed funds pool investors' money they typically have the buying power of millions of dollars. This allows them to take advantage of investment opportunities that are not generally available to individual investors.
  

We believe you are the best person to determine which of our managed funds is right for you. But we do provide you with lots of literature in plain English and some helpful investment wizards to help you reach your decision. If it is your first time investing, you should also consider the following:

1. Define your investment time horizon - how long do you want to invest for?
2. What are your financial goals - what are you investing for?
3. Understand you risk tolerance and the risks associated with each of the managed funds.
4. Combine your goals, time horizon and risk tolerance and find a managed fund that matches these objectives.

We've come up with an easy way for you to define your investment profile. Using our investor tool, simply work out your risk profile, to see a portfolio allocation designed with your goals in mind.

• Start investing from $250
• Low entry & no RaboDirect exit fee (Note, the buy price is greater than the sell price on some funds)*
• No ongoing transaction fees
• Access top rated Managed Funds 24/7
• Access local and global Managed Funds
• Consolidated administration and reporting on your RaboDirect Managed Funds
• Access to Morningstar research and ratings

First you have to become a customer of RaboDirect. Once you open a Master Savings Account, you can then also open a Managed Fund Account online, or as part of the initial application. Once you have your Managed Fund Account, you can purchase Managed Funds online via the internet. 

If you are already a RaboDirect customer you can create a Managed Fund account by logging in to your RaboDirect account, selecting "Managed Funds", then "Open New Account".

Already a customer?

Step 1: Purchase funds

• Log-in to your account.

• Click on "Managed Funds", then "Purchase".

• Click on "Buy" next to the fund you wish to purchase.

Please note: Before you can purchase managed funds your money needs to be cleared and in one of your RaboDirect call accounts; it will take 2-3 business days to clear once we receive it.

The first time you purchase funds you may be prompted to open a managed fund account (if you did not request to do so when you opened your On-Call Account).

Step 2: Processing

At 12:30pm on every business day RaboDirect sends all orders to the fund manager for processing. Therefore, if you purchase funds after 12:30pm your order will not be sent until the following business day. Depending on the fund, it generally takes between one to eight days to receive the information back from the fund managers. However, most funds are processed within two to four business days. The Cash Advantage Fund is normally processed by the same evening.

New to RaboDirect?

If you're not yet a customer, you'll need to apply online and open a Master Savings Account. When your account is set up, login in and follow the steps above.

The minimum amount per order is $250.

Each Managed Fund comes with additional information, e.g. fact sheets, an investment statement, or the most recent half-yearly report. We advise you to read these documents carefully before placing an order, giving full consideration to your risk profile and investment objectives.

When you provide us with a purchase order, you must confirm whether you have made yourself aware of the investment statement. These can be found under the "Literature" tab on the "Find a Fund" screen".

At 12:30pm on every business day RaboDirect sends all orders to their respective Fund Managers for processing. Therefore, if you purchase funds after 12.30pm your order will not be sent until the following business day. Most Funds take two full working days to process. This is from the time your order is sent to the Fund Manager, to it then settling and showing in your Managed Funds account online. Your account will be updated with your unit holdings, with the purchase amount being deducted from your RaboDirect savings account at the same time.

* These are standard processing times provided by our Fund Managers. Actual processing times may vary from this.

We suggest that you place your order at least 15 minutes before 12:30pm if you wish your order to be sent on the same day. With orders there are no guarantees regarding the Fund Price for which your order will be executed. Please note that it may differ from the fund price currently indicated.

An overview of all investment costs-per-product can be found under the "Fees" tab on the "Find a Fund" screen".

More detailed information about the fees and conditions can be found in the investment statement for each fund, found under the "Literature" tab on the above screen.

You can check if your purchase has been executed in the "Summary" section of your Managed Fund Account by clicking "Settled Order Statements". Please note that the transactions will only display here the day after they have been processed into the account.

Yes, provided your order has not yet been executed. You must first cancel the existing order and then place a new order.

Yes, provided your order has not yet been executed. The deadline is 12:30pm on the day we process your request to the fund managers.

To do this click "Managed Funds", "Pending Orders", then "Cancel" while you are logged in to your account.

In normal circumstances, managed fund orders are carried out according to the time frames specified in this FAQ under the question "When are purchases (buys) Completed?".

Public holidays will cause small delays and there can potentially be other delays, for example when the fund manager is auditing or processing tax details for a fund. Such delays are rare would not normally be longer than a few business days.

For PIE Managed Funds tax will be debited in two instances:

1. On the sale of units.
   When units are sold from a PIE managed fund, the accrued tax liability (for the existing tax year at the time of the sale) for those units is automatically deducted from the proceeds of the sale. 

2. At the end of the tax year.
   At the end of the tax year RaboDirect will automatically deduct any outstanding tax liability payable from your account and pay this to the IRD on your behalf.

The process works as follows:

RaboDirect will simply debit or credit your Master Savings Account depending on your overall tax position (calculated on a per fund basis and credited or debited as a single figure).

Tax Rebates

Where a rebate exists we will credit this to your RaboDirect Master Savings Account (MSA).

Tax Liability

For a tax liability we will apply the following steps:

• Your RaboDirect Master Savings Account (MSA) will be debited for the amount of the liability.

• If insufficient funds are available your account will be overdrawn and we will contact you to arrange an account top-up. Please note that no fees will be charged if your account becomes overdrawn. 

• If we are unable to contact you we will sell down sufficient units in the relevant fund(s) to meet your tax liability and thus cover the overdraft.
  

RaboDirect offers answers to tax questions in the FAQs above and below, however if you are unsure about anything you should consult your own tax adviser in relation to your managed funds.

The Portfolio Investment Entity ("PIE") regime is a new regime for taxation of PIE managed funds. The PIE's income is attributed to its investors, based on their shares of the PIE, and is taxed at each investor's prescribed investor rate ("PIR"). The PIE regime creates tax advantages for many PIE investors, mainly because the maximum PIR is 28%. The PIE regime therefore provides tasty tax benefits to investors who are on a 33% or 30% tax rate and invest in a PIE, such as our Cash Advantage Fund.

An investor's prescribed investor rate (PIR) is similar to an individual's Resident Withholding Tax rate, although there is a key difference - the top rate for PIR is 28%. The PIR is the rate at which an investor's taxable income in a PIE will be taxed. RaboDirect is obliged to use the default PIR for individuals unless you elect one of the lower rates of 10.5% or 17.5%. As a Trust, company or incorporated society your PIR will be 0% as you file a tax return. Trusts however may elect a PIR of 17.5% or 28%.

If in one of the last two financial years your taxable income was $14,000 or less and when combined with the income from your PIE investments your total income was $48,000 or less, then all of your PIE income will be taxed at 10.5%.

Or if in one of the last two financial years your taxable income was between $14,000 and $48,000 and when combined with the income from your PIE investments your total income was $70,000 or less, then your PIE tax income will be taxed at 17.5%.

If in both of the last two financial years your taxable income was more than $48,000 or, when combined with the income from your PIE investments your total income was more than $70,000 your PIE tax income will be taxed at 28%. 

This is a considerable advantage for investors in the 30% and 33% tax bracket as they are paying only 28% tax on their PIE income.

You can elect your correct PIR rate via our online banking site.

For further assistance in calculating your PIR there is guidance on the IRD's website: www.ird.govt.nz

You can change your PIR rate at any time by logging in to your account and clicking "Tax", then "Change tax details".

The Regular Managed Funds Investor Plan allows you to create a regular ordering process for purchasing Managed Funds. This means you don't have the hassle of making manual purchases all the time.

The Regular Managed Funds Investor Plan is built on a model known as 'dollar cost averaging'. It's a simple idea designed to reduce exposure to the risks associated with making one-off large investments. Instead, you invest a fixed amount on a regular basis over a longer period of time to help smooth out the ups and downs of the market.

The result? You buy more units when prices are low and less when prices are high so you get a better average unit price over time. It's a tried and tested theory that works much better than trying to time the market.

Step 1:   Set up an account

If you don't have an account already, you'll need to open a RaboDirect Savings Account. Open an account here.

Existing Customers

Log in to your account, click on the 'Managed Funds' menu option, select 'Regular Investor Plan'. Follow the simple instructions.

Step 2: Choose an account name

Choose your Regular Managed Funds Investor Plan name e.g. Early Retirement, Dream holiday, New Sports Car.....you get the idea.

Step 3: Choose the investment frequency

Decide how often you'd like to invest e.g. weekly, fortnightly, monthly, quarterly, 6 monthly or annually.

Step 4: Choose a start date      

Set the date from which you'd like to start investing.

Step 5: Choose the RaboDirect Savings Account to fund your Regular Managed Funds Investor Plan

Remember, you'll need a sufficient amount of money in your RaboDirect Savings Account to feed you Regular Managed Funds Investor Plan.

Step 6: Choose your regular investment amount  

Decide how much you'd like to invest on a regular basis.

Step 7: Choose your Managed Funds

Select which funds you'd like to invest in.  For example it might be 100% in a single fund, or 50% in two different funds. You can split your amount anyway you like.

Yes, you are free to make changes or simply cancel your Regular Managed Funds Investor Plan at any time. Remember, you must make any changes or cancellation at least one business day before your Regular Investor Plan is next due.

You may choose to include any number of funds from our existing range and add them to your plan. Remembering that if you have 2 funds your plan will be a minimum of $500 ($250 per fund), having 5 Funds would be a minimum of $1250 and so on.

The minimum amount for a plan is $250.

Your plan consists of a regular order executed on a frequency of your choice. When you invest in any of our Managed Funds the entry fee is deducted from the amount invested.

We will try up to 3 times (over 3 days) to complete the transaction.  If it is still unsuccessful due to insufficient funds your Plan will not take place until the next frequency date.

If you are regularly transferring funds into your Master Account, we recommend you set your Regular Investor Plan 3 business days after the funds reach your Master Account to ensure that they are cleared.