Unlisted funds are a form of direct investment that provides investors with the opportunity to access a portfolio of assets selected by a fund manager. When you invest in an unlisted investment fund or a property fund, you typically receive units in the investment vehicle which hold the assets, often a trust structure. Unlisted funds provide investors with an opportunity to gain exposure to an asset which would typically be out of reach and can form part of a well-balanced portfolio.
An unlisted investment fund or property fund can exhibit lower volatility compared to a listed fund depending on how frequently the values are updated (daily, weekly, monthly, quarterly or annually), and investors may or may not be able to trade them on a daily basis. The underlying investments in an unlisted infrastructure or commercial property fund are often valued annually, so the investment value will not fluctuate between these periods.
When considering an investment in an unlisted fund, you should consider the liquidity constraints before proceeding. That is how difficult it is to sell the investment when you choose to do so. Depending on the investment managers processes, it can take several days or weeks to sell your investment. If you sell between valuation dates, you might lose out on potential capital gains.
In recent years, the Australian Securities Exchange has released a trading platform called mFunds which hosts a wide range of unlisted funds. This platform has dramatically improved the speed and convenience of investing in an unlisted fund with a similar process to buying and selling listed assets.
