20.02.23
One of the investment decisions most Australian investors face is whether to invest in a retail investment fund. With this in mind, we discuss below what retail funds are and the benefits of investing in one.
What are retail funds?
A retail fund is an investment fund for individual investors who are classified as retail investors. So the next question is, what’s a retail investor?
Essentially, all investors are classified as retail investors apart from those investors who are classified as being wholesale.
The key requirements for being classified as a wholesale investor are:
- having net assets of at least $2.5 million.
- having a gross income of at least $250,000 for each of the last two financial years.
or
- being willing to invest at least $500,000 in the fund.
Retail funds are designed to protect individual investors, so they must adhere to a higher level of compliance than wholesale funds which are designed for larger, experienced investors.
Two main benefits of investing in a retail fund.
Firstly, investing in a retail fund means investors receive all the protections set out in The Future of Financial Advice reforms. The long list of the required information is generally disclosed to retail investors via a Product Disclosure Statement (PDS) which includes information on a product’s key features, fees, commissions, benefits, risks and complaints handling procedures. Having access to this excellent level of data is a significant advantage over the less detailed information memorandums wholesale investors tend to rely upon.
And secondly, retail funds tend to have much lower minimum investment amounts than wholesale funds, making them more accessible for individual investors. For example, many retail funds have a minimum investment amount of $10,000, whereas the minimum investment amount on wholesale funds may be as high as $500,000. By offering a relatively low minimum investment amount, retail funds allow individual investors to gain access to investment opportunities that may otherwise be out of reach.
Our final thoughts
As Landen’s Head of Funds Management, Jeff Li explains: ‘Retail funds offer important benefits for our valued clients thanks to the higher compliance hurdles on these funds. As a result, we launched several outperforming funds for our retail clients who enjoy the disclosure and protections these funds offer. We’re viewing the recent market weakness as a great window of opportunity for our clients to top up their investments in our preferred retail funds.’
Visit our Funds page to learn more about Landen’s retail funds.