The managed fund

Popular Reading


The managed fund

The managed fund normally splits its investments between all these types of investment, holding units in all these other funds. It is similar in objective to the traditional life insurance company fund, which holds the same type of investments. The aim is to minimise risk by switching the proportion of money invested in the different sectors according to current conditions and the investment outlook. In practice, this is not as easy as it sounds, because, as we have seen, large blocks of property are not easily marketable and the same can apply to shares. Nevertheless, the spreading of investments across a wider range of assets does provide some protection against extreme fluctuations in any one sector.

These investment or "bond" funds have achieved their success largely as a result of their tax advantages, which derive from the tax position of life insurance companies. The income from investments in the fund is taxed at the rates appropriate to life insurance companies, that is at the basic rate of income tax on income from shares and at 37.5% on income from other investments. This income is not distributed, but is accumulated within the fund or "rolled up" to earn a greater return for investors.

For a higher-rate taxpayer this alone carries considerable advantages. If one is liable to income tax at 50% or 60% or even more, then the ability to "roll up" the income from an investment without any personal tax liability is extremely useful. Instead of investing in the normal way and paying the consequent rate of income tax, the income is automatically taxed at the lower rate within the fund. In the case of gilt-edged, for example, someone paying tax at 65% would get a net return of only 4.2% from a stock yielding 12% before tax. If the individual invested in a gilt fund, the fund would pay tax at only 37.5% and would have 7.5% after tax to reinvest for him. Over a period of years the reinvestment of income can produce sizeable investment gains, and this applies to the other types of fund as well.

Find out more aboutThe managed fund - Click Here

The property fund

The property fund invests in commercial, industrial and occasionally agricultural property and land. Normal offices, shops and factory or warehouse buildings form the bulk of the portfolio of investments, but some funds also themselves undertake small developments, that is, they buy a site, arrange finance, erect and finally let a building, in the hope of establishing a value in excess of the costs involved. Apparently similar funds may have very different characteristics. One fund may, for example, have invested heavily in offices which are currently yielding a relatively low return by way of rentals... see: The property fund

Umbrella Companies that work for you

Looking to minimise your tax? Need to create an Umbrella company buy do not know which is the best option to choose? Try Compare the Umbrella. They list the 10 ten best Umbrella company providers.