How can retail investors access large diversified portfolios without multimillion dollar balances?
Managed investment funds. They pool capital from many investors and invest that money into a diversified portfolio of assets, managed by a professional. It’s how most Australians save for wealth outside of shares and real estate.
Here’s the deal:
Managed investment funds let you:
- Access professional expertise
- Spread risk across many assets
- Start with a much smaller amount of money
You’ll learn exactly how options work, the types of options that are available to you and where options fit into a smart investment portfolio.
Time to dive in…
Here’s what’s inside:
- What Are Managed Investment Funds?
- Why Investors Choose Managed Funds
- The Main Types Of Managed Investment Funds
- Where Managed Funds Fit In A Portfolio
What Are Managed Investment Funds?
A managed investment fund is called a pooled fund. Lots of investors pool their money together. A professional fund manager chooses how to invest it.
The pot could contain shares, bonds, property, cash, or indeed any combination of the four. Investors in the fund hold “units”, and the value of those units rises and falls depending on how the underlying assets go up or down in price.
Looking for something more in-depth about what are managed funds and how they work? They aren’t new, but the industry has certainly boomed. In 2025, Australia’s managed funds have grown to a value of approximately $4,830 billion. That’s increasing at almost 5% annually since 2020.
That’s a lot of pooled capital doing work every single day.
Here’s the thing:
Managed investment funds are supervised by ASIC. The majority of retail funds must be registered as managed investment schemes – this provides significant protection for retail investors.
Why Investors Choose Managed Funds
There are several reasons why investors choose to invest in managed funds. Here are some of the most common reasons.
Diversification Without The Headache
Buying 30 different shares takes time, brokerage fees, and a decent chunk of cash.
Managed funds do that all in one transaction. One unit of an appropriately diversified fund can provide exposure to hundreds of individual assets from across the sectors and countries. Achieving that sort of diversification yourself is difficult without significant capital.
Less concentration risk = more peace of mind.
Professional Management
Not everyone has time to research companies, monitor economic data, or rebalance a portfolio.
Fund managers do that work for a living. They have researchers, analysts, tools and decades of experience between them. For investors who don’t want a second career on top of their actual career, paying for that experience can be worth it.
Access To Hard-To-Reach Markets
Some assets are tough for individuals to buy directly. Think:
- Commercial property
- Corporate bonds
- Private credit
- Global small-cap shares
Managed funds group these together so that retail investors can have exposure without having to have millions of dollars or access to a broker.
Lower Entry Points
Lots of managed funds will take $1,000 or less to get started. That’s a fraction of the price of purchasing an entire property portfolio or piece of a private credit investment by yourself.
Pretty cool, right?
The Main Types Of Managed Investment Funds
Managed funds take many forms. They differ by their structure and investment objective.
Retail Funds
Retail funds are targeted towards retail investors. They are subject to stringent disclosure requirements and have lower minimum investments.
Oddly enough, retail investors represent just five per cent of funds under management. That group makes up most Australians’ only interactions with the industry.
Wholesale Funds
Wholesale funds are reserved for high-net-worth and sophisticated investors. They often have higher minimum investments but come with lower fees. Investors generally need $500,000+ to invest, or pass certain income and net worth tests.
Index Funds & Active Funds
Managed funds also split by strategy:
- Index funds: Track an index like the ASX 200. Low fees, passive approach.
- Active funds: A manager selects the investments with the goal of outperforming the market. Higher fees. Higher returns (potentially).
They both can be useful. It really just depends how much an investor wants to pay to have the POSSIBILITY of “beating the market”.
Specialist Funds
Then there are specialist and single-asset funds. These might focus on:
- Property
- Infrastructure
- Ethical/ESG investing
- Private credit
- Fixed income
Specialist funds allow investors to gain targeted exposure to a particular asset class.
Where Managed Funds Fit In A Portfolio
Here’s where it gets practical.
Diversified portfolios often contain a variety of asset classes for growth and risk management. Mutual funds can help in several ways.
As A Core Holding
For new investors, a managed fund that invests across many assets can be the “core” of a portfolio. It instantly diversifies holdings and reduces the hassle of picking individual winners.
As A Diversifier
For investors already owning direct shares or property, there are gaps that can be filled by adding a managed fund. An investor with direct Australian shares only could complete their portfolio with:
- A global equities fund
- A fixed income fund
- A property or infrastructure fund
That spreads risk and reduces reliance on one single market.
As A Tactical Layer
Sophisticated investors can also use managed funds to place a directional bet. Think themes like clean energy or health care innovation or emerging markets. It’s hard to buy individual shares to play those themes…
A specialist managed fund gives instant, diversified exposure to the theme.
Things To Watch Out For
Managed investment funds aren’t magic. There are some real trade-offs to keep in mind:
- Fees: Funds can be expensive, particularly actively managed funds. Look for the MER (management expense ratio).
- Liquidity: Some funds only let investors redeem monthly or quarterly.
- Performance: Past performance is not indicative of future results – there’s a reason for that old saying.
A little bit of homework can take you far. Read the PDS, research the fund manager’s track record, and know how the fund truly makes its money.
The Bottom Line
Managed investment funds are one of the most versatile tools available to investors. They:
- Pool capital from many investors
- Give access to professional management
- Spread risk across many assets
- Open doors to markets that are hard to reach solo
Whether used as a core holding, a diversifier, or a tactical play, managed funds can have a role in just about any portfolio. The challenge is picking the right fund for the right job – not just chasing last year’s hottest performer.
Compare fees, strategy, and manager caliber. Doing so can make managed funds one of the easiest and wisest ways to build long-term wealth passively.