RaboDirect Managed Funds

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Forums › Finance and wealth management › RaboDirect Managed Funds

Oriphix

523 posts

Ultimate Geek

#190832 14-Jan-2016 09:00

Hi All,

I have never invested in anything so completely new to this. After doing some research I found that put money in Managed Funds is a better option for me rather then term deposits as I am yet to be 30 and still have some years where I can plan for my retirement / take risks.

Now that's out of the way here goes.

Is there anyone here that is using or has used this facility. I had a questions in regards to "Management fee". From what I read online most people say that if you can invest directly go to the source to cut out middle man so if you make gains, most of your money won't be taken up by fund managers.

Now having a read on the RaboDirect website I saw that they charge you a entry fee of 0.75% which is one off so that's okay.

The part I don't understand is how the management fee works. The image below Rabo says fees are charged by the fund provider. So I assume that means the fund provider has there own managers which charge a % for there work.

They also say that they have fund managers so does this refer to the fund providers fund managers or RaboDirect inhouse fund managers?

Is that a % or is that a $ value?

Lets say for example I invest $500 and make $500 gain so will the management fee be $10 p.a as a total is a $1000 (using Mint Aus as example) ?

I know these would be better directed to the help desk for Rabo but thought it would be also good to get some feedback in regards to the users here that have had experience in this. I have had some bad experiences with help desks recently so staying away from them as much as I can.

Thanks

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5288 posts

Uber Geek

#1470542 14-Jan-2016 09:22

I found with my managed fund that the managers were making more than me.

Often investment agents obfuscate and confuse matters regarding fees, as did mine. Already the rabo offer is already confusing because they say they do not charge fees but in the small text they say they do charge fees.

Fees come in so many clever forms all designed to put more money in their pocket than yours, internal fees to the investment, fund manager fees, entry/exit fees/maintenance fees and so on. You'll never know much of this, you'll just get a lower return than you otherwise would.

You should check out other providers/products too. Take a look at passive funds (index trackers) as they seem to have the lowest fees - rabo may offer these too.

nathan

5695 posts

Uber Geek
Inactive user

#1470624 14-Jan-2016 10:56

sounds expensive for the service you provide IMHO. You’re better off doing it yourself. If you don’t want to manage your own investments, you might want to look into some of the other indexed funds though that have lower fees rather than "active"

ie

What is the cost of this measly 0.45% fee?

Over 40 years, at a gain of 7%, the net cost is 16%. That means you lose 16% by paying this measly 0.45% fee.

On a 10,000 investment, you could have had 149,745, but instead have 126,513

afe66

3181 posts

Uber Geek

Lifetime subscriber

#1470644 14-Jan-2016 11:11

Recent article on NYTimes on pension planning all recommended index funds and suggested never buying individual company shares as most people don't know enough to reliably pick winners.

A.

jonathan18

7413 posts

Uber Geek

ID Verified

Trusted

#1470668 14-Jan-2016 11:38

afe66: Recent article on NYTimes on pension planning all recommended index funds and suggested never buying individual company shares as most people don't know enough to reliably pick winners.

A.

Interesting - can you point us in the direction of this article? Or is it paywalled?

afe66

3181 posts

Uber Geek

Lifetime subscriber

#1470731 14-Jan-2016 12:30

http://www.nytimes.com/2016/01/09/your-money/how-should-you-manage-your-money-and-keep-it-short.html?ref=your-money

I have subscription but I think the NYT lets you read 10 articles for free.

Click to the slides.

A.

nickb800

2715 posts

Uber Geek

Trusted

#1470756 14-Jan-2016 12:53

I've used this service in the past. Rabo plays the role of a marketplace/broker. The entry fee goes to Rabo. You'll have to go digging into the individual fund documentation to see how the management fee is applied. Often it is applied to the total balance - i.e 1% of $1000 example. There is likely to be performance fees too - important to understand the wording to see how it is applied (a key point is what gains count as performance - all gains, gains in excess of a relevant benchmark, gains that claw back previous losses).

I was pretty satisfied with the returns that I made, noting that they weren't stellar because I withdrew early after a year or so to buy a house. I think the fees are generally reasonable for equity/high risk/high return/aggressive funds but - net returns are usually good. Wouldn't bother with managed funds for a balanced or conservative portfolio as I think the net returns after fees are so close to bank deposit rates that they don't adequately reward teh risk.

Oriphix

523 posts

Ultimate Geek

#1470787 14-Jan-2016 13:19

nathan: sounds expensive for the service you provide IMHO. You’re better off doing it yourself. If you don’t want to manage your own investments, you might want to look into some of the other indexed funds though that have lower fees rather than "active"

ie What is the cost of this measly 0.45% fee?

Over 40 years, at a gain of 7%, the net cost is 16%. That means you lose 16% by paying this measly 0.45% fee.

On a 10,000 investment, you could have had 149,745, but instead have 126,513

How can you tell if the listing is a indexed funds?
Example if you look at: http://smartshares.co.nz/types-of-funds
It doesn't really state its indexed?

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Shindig

1585 posts

Uber Geek

Trusted

#1470804 14-Jan-2016 13:27

The Managed Funds have a purchase and a managment fees.

The Cash Advantage managed funds do not have a fee.

The little things make the biggest difference.

afe66

3181 posts

Uber Geek

Lifetime subscriber

#1470806 14-Jan-2016 13:29

Er...

On the page you listed above there is a list of funds on of which is NZ Top 50, click on the link it says

"The objective of the NZ Top 50 (FNZ) fund is to provide a return that closely matches the return on the S&P/NZX 50 Portfolio Index. The S&P/NZX 50 Portfolio Index comprises 50 of the largest entities listed on the NZX Main Board."
The under it, you can see what companies comprise the index

A.

Oriphix

523 posts

Ultimate Geek

#1470809 14-Jan-2016 13:30

Shindig: The Managed Funds have a purchase and a managment fees.

The Cash Advantage managed funds do not have a fee.

Ah okay so Cash Advantage is the same as index fund?

Oriphix

523 posts

Ultimate Geek

#1470827 14-Jan-2016 13:39

afe66: Er...

On the page you listed above there is a list of funds on of which is NZ Top 50, click on the link it says

"The objective of the NZ Top 50 (FNZ) fund is to provide a return that closely matches the return on the S&P/NZX 50 Portfolio Index. The S&P/NZX 50 Portfolio Index comprises 50 of the largest entities listed on the NZX Main Board."
The under it, you can see what companies comprise the index

A.

Yup I'm blind. :)
Didn't realize you can click on it.
Thanks

Shindig

1585 posts

Uber Geek

Trusted

#1470856 14-Jan-2016 14:06

So your tempted to use SmartShares rather than Rabo now?

I have just started to dabble with Rabo managed funds as well mate

The little things make the biggest difference.

Oriphix

523 posts

Ultimate Geek

#1470878 14-Jan-2016 14:34

Shindig: So your tempted to use SmartShares rather than Rabo now?

I have just started to dabble with Rabo managed funds as well mate

I am looking at long term (10-15 years). Well going by what others have said and fees wise I am leaning towards Smartshares.

I might start with the Index funds first and then build from there but not 100% sure at this stage doing more research, would like to do it right the first time if possible.

I noticed you can buy the Smartshares from ASB Securities as well as per there website but there brokerage fee is minimum $35 where as directly going to Smartshares looks to be free.

RaboDirect

2 posts

Wannabe Geek

Trusted

RaboDirect

#1470918 14-Jan-2016 15:08

Hi there, We have provided some answers below to your questions regarding RaboDirect’s Managed Funds. Give our friendly Contact Centre a call if there’s anything else we can help with. They’re available on 0800 22 44 33, 8am - 7pm weekdays or email info@rabodirect.co.nz.

From what I read online most people say that if you can invest directly go to the source to cut out middle man so if you make gains, most of your money won't be taken up by fund managers.

This is a good point you raise, in that there are “management fees” charged by fund managers to cover their services in managing the fund, and these management fees are a cost that you would not incur if you were making the investments yourself. There can however be challenges investing directly yourself, some of which include: having the understanding that the fund manager has of the market, and having the time to undertake the required analysis and research of all the possible investment options a fund manager may look at. Given the scale on which fund managers are investing, this may also allow them access to a wider pool of investment options that a direct investor may not have easy access to (i.e. if they are investing in offshore markets or into investment options with very high minimum investment amounts). In turn, this allows investors to access a wide range of underlying investments via a single managed fund with a relatively low minimum investment requirement (via RaboDirect you can invest in any fund with only $250).

It is the fund managers full time job to invest your money and seek out investment opportunities to provide the best possible return to investors in their funds. They will generally do this by undertaking numerous hours of research and analysis to uncover investment options they feel are in line with the funds’ mandate and provide the best possible opportunity of providing a good return. They will then combine these investments into a diversified portfolio and monitor these on a regular basis to ensure each of the investments within the fund is still fulfilling its objective. Should changes be required to the portfolio, fund managers will then execute the necessary trades. The management fee that a fund manager charges helps them cover these administrative costs of running the fund, and is a cost that is incorporated into unit price of the fund so is not a lump sum cost you need to pay on a certain day of the year. More information about the management fees that each fund charges can be found in the product disclosure documents of each fund manager, which are available here: https://www.rabodirect.co.nz/legal/product-disclosure-documents/default.aspx

Now having a read on the RaboDirect website I saw that they charge you a entry fee of 0.75% which is one off so that's okay.

Correct, RaboDirect charge a one off entry fee of 0.75% on each lump sum investment made, with the net amount invested with the fund manger. E.g. if you make a lump sum investment of $1,000 in a managed fund via RaboDirect, RaboDirect will deduct $7.50 and the net amount of $992.50 will be invested with the fund manager on your behalf. Should you wish to invest in managed funds regularly via RaboDirect, you can set up a Regular Investor Plan, in which case the entry fee is reduced to 0.50% on each purchase. We should also point out that we currently have a promotion running offering 0% RaboDirect entry fee on the majority of the funds we offer access to, with more information able to be found here: https://www.rabodirect.co.nz/cash-funds/managed-funds/find-funds/default.aspx

The part I don't understand is how the management fee works. The image below Rabo says fees are charged by the fund provider. So I assume that means the fund provider has there own managers which charge a % for there work.

As explained above, the management fee that a fund manager charges is incorporated into the unit price of the fund and is not a fee that you have to pay as a lump sum at a certain time of the year. Some funds do also charge a performance fee if their performance exceeds a pre-determined benchmark. Information on the fees each fund charges can be found in the product disclosure documents of each fund manager.

They also say that they have fund managers so does this refer to the fund providers fund managers or RaboDirect in-house fund managers?

The terminology “fund manager” and “fund provider” is used interchangeably on the RaboDirect website and we will look at amending this for consistency. In any case, RaboDirect is not a fund manager, we simply act as a conduit for you to gain access to the fund managers we offer via our website (some of which individual investors are unable to access directly themselves). Is that a % or is that a $ value? The management fee you have highlighted is a %.

Lets say for example I invest $500 and make $500 gain so will the management fee be $10 p.a as a total is a $1000 (using Mint Aus as example) ?

As explained earlier, the management fee is incorporated into the unit price, which for most funds is calculated on a daily basis, so is not necessarily a lump sum deduction at a certain point of the year. The total management fee received by the fund manager will therefore depend on the performance of the fund, and the value of your investment, each day. Although unlikely, if the value of your investment stayed at $500 for almost 1 year, and then at the very end of the year jumped in value to $1,000, the management fee attributable to the higher amount would only be earned by the fund manager for a short period of time. The total management fee earned by the fund manager for the year your investment is held would be the cumulative total of each days management fee over the course of the year.

Shindig

1585 posts

Uber Geek

Trusted

#1470963 14-Jan-2016 15:27

Nice one @Rabodirect for jumping on here and replying.

The little things make the biggest difference.

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