There’s a lot for investors to love about managed funds.
If you’re wanting to diversify your portfolio, looking for a way to earn passive returns, or just want to leave the heavy lifting of investment decisions to a professional, managed funds can tick plenty of boxes.
Traditionally, Westbridge has focused solely on closed-ended fund structures, but the recent launch of our Westbridge Industrial Opportunity Fund has seen us diversify into open-ended fund offerings.
Below, we take a look at the fundamentals of open-ended fund structures, including the key differences from closed-ended funds and the most commonly asked questions we receive from investors.
What is a managed fund?
For those who are new to fund investing, the idea behind managed property funds is very simple.
You pool your money with that of other investors to buy into an underlying asset or assets, letting investment professionals do all the work identifying and managing the asset(s) on your behalf.
In this way, a managed fund (or ‘property trust’) saves you time and effort, while allowing investors to gain access to assets such as commercial property that many investors don’t have sufficient capital to buy into on their own.
Introducing a new open-ended fund
To date, Westbridge’s unlisted property funds have all been ‘closed-ended’ structures.
This means that when each fund has raised the necessary capital to purchase the underlying property(s) within a set window of opportunity, the fund is closed to new investors or further injections of money from existing investors.
Recently, however, Westbridge launched the first of our ‘open-ended’ property funds – the Westbridge Industrial Opportunity Fund.
What is an open-ended fund?
Unlike closed-ended funds, an open-ended fund welcomes new capital at regular intervals.
In the case of Westbridge’s open-ended funds, units in the fund can be purchased monthly at the prevailing unit price and are issued at the end of the month following acceptance of a valid application.
Additional inflows of capital after the purchase of initial assets can be used to acquire further assets to grow and diversify the fund’s investment portfolio.
If an open-ended fund has no immediate plans to buy an asset (possibly because there are no suitable assets available on the market at that time), surplus capital can be allocated to alternative investments such as term deposits to continue earning income or can be used to reduce debt across the fund.
In this way, investors can be confident that their money is working hard at all times.
Do open-ended investment funds have an end date?
Unlike closed-ended funds, open-ended funds do not have a predetermined end date.
The fund can, in theory, keep going for many years until the fund manager deems it the opportune time to wind up.
However, fixed redemption windows provide investors with opportunities to redeem their units (including any growth realised on those units). In the case of the Westbridge Industrial Opportunity Fund, these redemption windows are available every five years.
How are unit prices decided in an open-ended property fund?
In an open-ended property fund, the unit price is determined by the current net asset value of the fund, taking into account acquisition and transaction costs associated with the purchase of the fund’s underlying assets.
The fund manager’s role is to actively manage the portfolio, aiming to maximise the asset value over time to drive growth in unit prices.
In the case of Westbridge, property valuations will be conducted at least annually, and more often if major changes occur such as key leasing events or capital upgrades that could drive a significant rise in the value of the underlying properties.
Any change in unit values are reported monthly, with these reports made available to both current and prospective investors.
What is the minimum investment amount for open-ended investment funds?
While each open-ended fund will have its own minimum investment requirements, Westbridge’s open-ended Industrial Opportunity Fund has a minimum initial investment of $100,000.
Additional investments can be made with a minimum investment of $10,000.
What are the benefits of the open-ended fund structure?
Westbridge has given considerable thought to the introduction of open-ended funds, and we believe it is an option that gives investors three compelling advantages:
- Timing – an open-ended fund allows you to invest when you have funds available (providing the fund is deemed open by the fund manager) as opposed to during a fixed investment window. This means you can choose to buy units in the fund whenever you have the cash available, as opposed to when a specific asset is purchased.
- Top-up options – An open-ended fund structure gives investors the flexibility to invest initially, and then increase their fund holdings in smaller increments if they want to increase their exposure to the fund’s underlying assets. Again, these top-ups can be made monthly, rather than waiting until a new asset is acquired.
- Flexible withdrawal options – an open-ended structure gives investors the appeal of increased liquidity compared to fixed-date funds through set redemption windows. This provides investors with the flexibility to redeem their units prior to the end of the fund’s closure should their life stage or financial plans deem it the right time to do so.
While open-ended funds can provide a number of benefits to investors wanting increased flexibility from their real estate investment, there are of course considerations to take into account.
Some investors will still prefer the fixed nature of closed-ended funds and the certainty that comes with them. Others may simply prioritise the fund’s strategy and sector focus in their investment decision rather than its structure.
Ultimately, though, the most important factor is to select an investment that aligns with your unique needs and investment objectives, and to do your due diligence into the product on offer as well as the team behind it.
Interested in learning more about our latest open-ended fund offering? Read more about the Westbridge Industrial Opportunity Fund here or speak to our relationships team for further information.
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