InvestSMART

Investing with Us

Under our Professionally Managed Accounts, you will gain the following benefits:
1. Professionally managed investment portfolio: An investment portfolio managed by InvestSMART's investment team.
2. You own the securities: The investor holds legal ownership and the underlying securities are registered under your name.
3. Reporting: Complete end of year Accounting and tax reporting is provided on your investment. 
4. Transparency: Investors are provided full visibility of all stocks held in your portfolio.
5. Tailored & Unique Portfolio: Under a PMA, we offer multiple model portfolios to choose from so that you can create a customised and diversified portfolio to suit your individual needs. Our model portfolios will differ in the levels of risk and return, and each model offers a different investment emphasis (such as Australian & international equities, property securities, international ETFs, etc).
6. Account Management: The paperwork and administration is taken care of, reducing the administrative burden on investors.
7. Tax effective: You only pay tax on gains & income you received.
8. Inflows & outflows: Your investment will not be impacted by the decisions of other model portfolio investors. An example of this is when a pooled investment like a managed fund receives redemption requests at the bottom of the market and is a forced seller at the worst time.
9. Flexibility with income/distributions: Choose to receive the dividends directly into an account of your choice or set up a regular payment or request drawdowns on an adhoc basis.

Once the funds have cleared in the InvestSMART Applications Account they will be transferred over night into your investment account. Once settled in the investment account our team will buy the holdings in the model/s you have selected. 

Hybrid securities can be an attractive investment proposition, offering relatively stable income streams and lower levels of volatility when compared to equities. However, many hybrids are often more complicated than they seem and identifying which are appropriately priced is not always a simple task.

What are hybrids?

Hybrid securities are financial instruments that have both equity and debt features, and have been a key part of the Australian stock market retail product offering for many years.

The term ‘hybrids’ effectively covers any interest-bearing security that has both debt-like and equity-like features embedded in it. Some hybrids (like those issued by the banks) take this dual nature all the way to the possibility of conversion into the ordinary shares: others (like some corporate hybrids) only have equity-style features, such as the ability to defer interest payments without triggering a default.

Repayment of the investor’s principal can be in the form of cash or ordinary shares of the issuer. Although they are part of the Australian Securities Exchange’s (ASX’s) listed interest-bearing security – or listed credit – sector, the hybrids are a discrete group of investments because of their equity-like features.

Hybrid securities’ distributions (or dividends) can be franked or unfranked. They are typically unsecured, ranking just above ordinary equity. Hybrids are technically perpetual securities, meaning that they may never be redeemed, and an investor may never have their invested capital returned.

 

Key Features of Hybrids

When a hybrid is issued, investors know the following:

  • the face value – the price at which the security is issued and the amount the investor will receive at maturity/redemption by the issuer;
  • the coupon – the distribution/dividend return investors receive each year for holding the security, paid either quarterly or semi-annually;
  • the maturity/redemption date – the date at which holders will be repaid the face value of the security in cash; and
  • the conversion date – the date when a preference share or other convertible security will convert into ordinary shares in the issuer (assuming the required conversion conditions are met).

 

Why invest in hybrids?

For investors, hybrids promise regular interest payments at rates usually several percentage points higher than those paid on bank term deposits or ‘vanilla’ corporate bonds; while the potential equity convertibility is a more conservative way of holding exposure to a company.

 

What is the InvestSMART Hybrid Income Portfolio?

The InvestSMART Hybrid Income Portfolio is a professionally managed portfolio that gives you access to a hand-picked selection of 10 to 25 hybrids to diversify your income stream, with the added benefit of minimised portfolio risk. 

Our Hybrid Income Portfolio has been designed to deliver a regular income stream with lower levels of volatility.

The Portfolio’s objective is to to achieve a return of 3% (including franking credits) above the RBA Cash rate per annum over three year rolling periods.

 

The main benefits of the InvestSMART Hybrid Income Portfolio include:

  • Lower risk than ordinary shares and a higher return than cash and cash like investments
  • Diversification across 10–25 securities to minimise portfolio risk
  • Professionally managed by our investment team, with active monitoring and rebalancing
  • Low trading costs for rebalances (<0.05%)

 

More information on investing in hybrids:

InvestSMART Hybrid Income Portfolio

Launching InvestSMART's Hybrid Income

Investing in Hybrids for Income

An investor's guide to hybrid securities

 

 

 

 

Diversification

We recognise that over the long term not one asset class is guaranteed to deliver substantial outperformance on a consistent basis and that attempting to time the turning points across the various asset classes is near impossible.

Lower Fees

Compounded over time, even a small difference in fees can result in substantial differences to your return and a higher management fee is no guarantee of better performance.

Transparency

We believe in absolute transparency. This directly impacts how we manage conflicts and report our performance. We take disclosure, conflicts and transparency extremely seriously. 

All forms of investing, regardless of what you are investing in, carry some kind of risk. These risks relate to factors outside of our control and include, but not limited to, market conditions. Using past performance is also not a reliable indicator of future performance. As such, InvestSMART does not guarantee returns on our investment products. If you are looking to make an investment, we strongly advise you to consider whether or not this investment is suitable for your circumstances and is in keeping with your investment goals.

The Standard Risk Measure (SRM) is a guide developed by the Financial Services Council (FSC) and The Association of Superannuation Funds of Australia (ASFA) that outlines the likely number of negative annual returns expected over any 20 year period.

The purpose of the SRM is to provide a standardised labelling system to assist investors in comparing investment options across providers, as shown below in Figure 1, FSC/ASFA Standard Risk Measure Classifications.

Risk Label Estimated number of negative annual returns over any 20 year period
Very Low  Less than 0.5
Low  0.5 to less than 1
Low to Medium  1 to less than 2
Medium  2 to less than 3
Medium to High  3 to less than 4
High  4 to less than 6
Very High  6 or greater


Source: FSC/ASFA Standard Risk Measure Guidance Paper for Trustees, July 2011

 

We have adopted these risk rating guidelines and applied them to our products, as highlighted in Figure 2: InvestSMART Group Investment Products' SRM:

InvestSMART Group Investment Products SRM

It should be noted, however, that the SRM is not a complete assessment of all forms of investment risk. For instance, it does not detail what the size of a negative return could be or the potential for a positive return to be less than a member may require to meet their objectives. As such, it should be used as a guide and as with any investment, investors should ensure they are comfortable with the risks and potential losses associated with their chosen investment option(s). Any information should be considered general in nature and before making any investment decisions, please ensure that you read all relevant disclosure documents related to that product.

When considering an investment, core to your decision-making process should be your investment objective, time horizon and risk tolerance. 

To help you determine which Portfolio might be suitable for you, join InvestSMART’s Chief Market Strategist, Evan Lucas and Head of Portfolio Services, Mitchell Sneddon as they discuss our four core diversified portfolios (Diversified Income, Balanced, Core Growth and High Growth), what they mean and in which circumstances you would use them.

You will be able to see your portfolio via the InvestSMART Portfolio Manager. Clients are able to see all holdings, the cost base, dividends and interest, fees, all transactions and deposits and withdrawals.

You are also able to include in the Portfolio Manager any investments you have outside of InvestSMART so you can have a neat overview of your total investments. The team can help you set this up.

The InvestSMART Capped Fee Diversified Portfolio range invests in exchange traded funds (ETFs) across a range of different asset classes including Australian shares, international shares, cash, fixed interest, property and infrastructure.

Depending on the goal of the portfolio it will hold a mixture of ETFs, each weighted depending on the risk profile of the portfolio.

InvestSMART's core belief is to focus on what you can control. Investors can control the diversification of their portfolio and the fees they pay but they cannot control the movements of investment markets.

By focusing on keeping investment costs to a minimum and diversification in line with your investment goal and timeframe the InvestSMART Diversified Portfolios help investors reach their investment goals sooner.

What are small companies?

The definition of what constitutes a “small company” differs within the industry, but in general terms, they are companies with a market value between $300 million and $2 billion.

 

Why invest in small companies?

Small caps offer an interesting opportunity in the market due to the lack of analyst coverage, subsequent potential for mispricing and long-term growth prospects.

 

What is the Intelligent Investor Australian Small Companies Fund?

Using Intelligent Investor’s value-based investing philosophy, the Australian Small Companies Fund is a managed fund that seeks to deliver moderate to high total portfolio returns over the long term across 10-25 listed small companies, often overlooked by the broader market. These are companies smaller than the largest in the Small Ordinaries Index (curr A2 Milk, worth $3.2B).

The ‘Small Ords’ are the smallest 300 companies in the All Ords index (e.g. company 201-500).

The fund is managed by our equities team at Intelligent Investor, and will use the same long-term, value investing philosophy that has provided the team's track performance to date.

 

The main benefits of the Intelligent Investor Australian Small Companies Fund include:

  • Good potential for generating capital growth
  • Lower fee structure than most fund managers
  • Benefit from a unique opportunity - less liquidity means larger funds struggle to invest in small companies.
  • Good potential for above average returns from active management by the experience team at Intelligent Investor
  • Limited contributions to ensure that performance is not impacted by the size of the fund, and to maximise the possibility of delivering a better return.

 

More information on investing in small companies:

Yes you can. You are able to set up a regular contribution plan or add funds at any point for your InvestSMART PMA.

When setting up your account you can elect to have a monthly direct debit from your bank account into your InvestSMART PMA. The minimum monthly direct debit amount is $100.

If you are already invested click on Investment Preferences to set up or amend the regular contribution plan in the Quick Links section or the My Account section when you are logged in.

To add funds whenever you wish click on the Add Funds link in the Quick Links section or in My Account.

Yes, you can easily switch between investment models and yes you can hold more than one investment model in the same account.

To switch between investment models simply click on Modify Allocations via the Quick Links section or within My Account. There are no administration fees for changing between models. The only costs associated would be the brokerage charges for selling and buying the new holdings. 

You can hold as many investment models in the same account as you like. If the model is part of our capped fee range the management fee will apply to your account as a whole. For example if you hold the InvestSMART Balanced Portfolio and the InvestSMART International Portfolio you will only pay a maximum of $451pa on your portfolio and not $451 per model.

 

Yes. Investors have legal ownership of the shares and they are held on a HIN (holder identification number) registered with CHESS in the investors name.

Should you wish to withdraw your investment with InvestSMART you can transfer your shares out to a brokerage account of your choice. 

Yes, your InvestSMART PMA will receive dividends from the holdings. InvestSMART does not participate in dividend reinvestment plans. As the dividends from your holdings are paid they will go into the cash component of your account. You will see these via the Dividends & Interest tab and Deposits & Withdrawals tab within the InvestSMART Funds section of the Portfolio Manager.

Clients can elect to have the dividends paid out in a monthly income sweep. At the end of each month all dividends and interest received by your account will be tallied and paid out to the bank account you nominated in your application form.

If you do not have an income sweep in place the dividends will remain as cash and invested when your portfolios cash percentage exceeds the investment models.

This depends on cash available in your account. If shares need to be sold down you will need to allow time for settlement (transaction day plus two days). After this the requested amount will be transferred to your nominated bank account. Depending who you bank with you will need to allow a further one to two business days.

Yes, when setting up an investment or at any point during your investment you are able to set up a direct debit regular contribution plan for a minimum of $100 per month. This can be altered at any point. Existing investors can find this form by going to the Forms section of InvestSMART Funds section of the Portfolio Manager or by emailing invest@investsmart.com.au.

The direct debit will take place on the 15th of each month or the closest following business day. If you have insufficient funds our administration team will contact you to help facilitate the transfer at another date or you can just skip the payment for the month.

There are three ways you can add funds to your portfolio:

  1. One off contribution: Simply use the BPAY biller code and reference number you used to fund your investment
  2. One off contribution with investment model allocation: If you have more than one investment model and would like to specify how the additional funds are split or would like to add a different model all together with the new funds you will need to send through a model allocation form (found in the forms section under InvestSMART Funds in the Portfolio Manager)
  3. Set up a regular contribution plan: When you establish your account you can nominate a set amount to be drawn from your bank account into the portfolio each month. This takes place on the 15th of the month (or closest following business day). The minimum amount is $100. If you already have a portfolio set up you can start a regular contribution plan by completing the form found in the forms section.

Yes. You will receive a comprehensive tax statement at the end of financial year and you will receive the franking you're entitled to once you submit your tax return.

You may notice your portfolio will not hold the stocks to the exact same weight as the model. Holdings may be marginally out for example a stock may be 4.2% rather than 4.6%. This is due to the practicality of buying a stock. We cannot buy a fraction of a stock and depending on the dollar size of your portfolio this could lead to it not being 100% on the model. 

To invest in any of our InvestSMART products, you are required to have a bank account domiciled in Australia, in the name of the entity you wish to invest through e.g individual name or company name. If you reside overseas, there are AML/CTF requirements that will have to be met and we will be more than happy to help you through the process. If you leave Australia, you can keep your investments active as long as you keep your Australian bank account remains open.

We know even the smallest difference in fees can result in substantial differences to your return. Through ongoing technology advances, our goal is to continue to reduce the cost of investing.

On launching our Professionally Managed Account (PMA) service, we have reduced our investment fees and updated our investment fee structure*.

To better diversify your portfolio or get you on the path to building your first investment portfolio, we offer the choice of the following investment strategies - Active Asset Allocation & Active Stock Selection range.

 

Investment Fees - Active Asset Allocation range

Professionally managed by our Portfolio Manager, our Active Asset Allocation Portfolio objective is to provide investors returns in line with the benchmark minus our fees by investing in blend of our preferred Exchange Traded Funds (ETFs).

Investment AmountFees*
$10,000 - $18,000 $99 p.a. capped
$18,001 - $81,999 0.55% p.a.
From $82,000 $451 p.a. capped

Brokerage: The greater of $5.50 per trade or 0.11% of the value of the trade

Indirect Cost: Between 0.18 - 0.31% p.a. depending on model portfolio selected (this is a cost associated with ETF providers and not marked up by InvestSMART).

Our capped fee structure is across our InvestSMART Portfolios (no matter if you invest in one or several models and applies to the following Models:

  

Investment Fees - Active Stock Selection Portfolios

Professionally managed by our Portfolio Managers, our Active Stock Selection Portfolios follow a value investing approach which involves searching for undervalued stocks that offer strong long-term prospects. These portfolios offers investors exposure to a portfolio of 10 - 35 ASX-listed securities with the objective to outperform their respective benchmark.

Investment AmountFees^
Up to $250,000 0.77% p.a.
$250,001 - $500,000 0.65% p.a.
$500,001 - $1,000,000 0.55% p.a.
$1,000,001 - $2,000,000 0.50% p.a.
More than $2,000,000 0.45% p.a.
 
Brokerage Fee - approximately 0.05% plus GST
Settlement Fee - $0.33 per securities transaction
Recoverable Expense Fee - $30 - $60
 
 

^Fees start at 0.77% p.a. of the balance of your portfolio and decrease as you invest more into that portfolio. The Investment Fees featured here are the minimum costs and include both the Investment Fee and Admin Fee. The Investment Fees are tiered, for example an Account balance of $500,000 would be charged 0.97% for the first $250,000 and 0.85% for the next $250,000.

Each model portfolio may vary in fees. Please read the product disclosure documents for full details before investing in our products.

 

*InvestSMART's Professionally Managed Account service was launched on the 1 November 2018.

 

If you invest in a Professionally Managed Account (PMA), there are no performance fees charged. The InvestSMART Australian Small Companies Fund does have a performance fee attached to the product, which is conditional on the fund's performance surpassing a couple of benchmarks. More details are provided in the fund's PDS.

No. The only expense is the brokerage costs when we purchase or when we sell down the portfolio.

Yes. The cost of brokerage is the greater of $5.50 per trade or 0.11% of the value of the transaction value.

Related topics
An Exchange Traded Fund, or ETF, is a type of managed fund where the underlying securities comprising this fund mimic an Index. Indices are created by ratings agencies to represent a subset of the stock market e.g. the largest companies trading on the Australian Stock Exchange is represented by the All Ordinaries Index. An ETF aims to invest directly in those companies making up a particular Index. As the companies/stocks/securities have already been determined in the Index an ETF is aiming to replicate, the level of funds management required is minimal compared to other types of managed funds where active investment decisions are required. Investing in ETFs are a form of passive investing and generally incur cheaper management fees, as fewer investment decisions are required in terms of managing an ETF.
We offer Professionally Managed Accounts (PMAs) through InvestSMART Group which are portfolios of securities that are managed professionally and cater for a number of investment objectives. These portfolios can comprise of ETFs or direct shares. We recommend that you understand your financial objectives and investment timeframe before committing to an investment. Further information may obtained through our website and we also urge to read all disclosure documents in relation to the PMAs.

Your shares will be held in your name in a CHESS sponsored broking account, therefore, in the event where we could not manage your shares anymore, you would continue to hold your shares in your name.

The underlying securities of the fund are small companies which may be too illiquid to invest in through an exchange on a frequent basis.
Yes. Any existing holdings of CHESS eligible Australian securities or other Eligible Investments may be transferred into your Account. Any investments being transferred into your Account must be in the same name that you are applying for an Account under. Eligible investments transferred into the PMA will be sold if they do not form part of the selected Model Portfolio(s).