Understand what impacts the value of a managed fund

By AMP Capital

When you invest in a managed fund, you are actually buying a number of equally valued ‘units’ in that fund. The value of these units will constantly fluctuate, depending on factors like how well the investments held by your fund perform, or if the assets held are creating income. The total value of a fund’s assets, before fees and other costs, is called the Net Asset Value (NAV), and is typically calculated on a per unit basis.

How unit pricing works

Unit prices typically change daily, with their day-to-day value measured in three steps.

  1. The total market value of all of a fund’s assets is calculated,
  2. The amount is adjusted for any liabilities (fees and expenses), then
  3. The total fund value is divided by the number of units held by investors.

The number of units you own in the fund remains constant (unless you buy or sell) – it’s just the price of each unit that changes.

For example, let’s say you invest $10,000 in a managed fund with a current unit price of $1.00. You will now own 10,000 units in that fund. Now, imagine the total size of this fund $100million – and over three years the total fund’s value grows 20% to $120million (with the same number of total units). The unit price will now be 20% higher: $1.20. You will still own 10,000 units – but your investment is now worth $12,000.

Of course, this is a positive scenario and in some years, it’s possible the Fund’s unit price will fall – decreasing the value of your initial investment. The unit price simply reflects the value of the managed fund’s investments, which will always rise and fall according to the market value of the fund’s portfolio. Fund unit prices will also usually fall after a distribution period – but that’s not a bad thing. In fact, it means you’re receiving income (along with your fellow investors).

How do distributions affect unit prices?

Over any given year, your managed fund will earn income in the form of dividends and interest. It may also make profit on investments sold. Australian tax law dictates that all income and realised capital gains must be paid out to investors as ‘distributions’ – which means you’ll receive a payout monthly, quarterly, or half-yearly depending on your chosen fund’s arrangement. When a fund pays out these distributions the total assets of the fund will fall by the total amount that is paid to investors, generally decreasing the total Net Asset Value of the fund and the unit price by a proportionate amount.

What you do with your distribution is up to you. You may choose to:

Reinvest your distribution

Some investors choose to automatically reinvest their distributions back into the fund and purchase additional units.

This generally means their total investment is worth a similar amount after the distribution as it was immediately before the distribution, i.e. they now hold more units in the fund but the fund’s unit price has decreased.

Take your distribution as cash

Other investors prefer to receive their distributions directly into their bank account, so they can decide where they’d like to spend or reinvest their money. These investors will get the benefit of the additional payment right away, but without additional units in the fund, their total value will generally decrease as the fund’s unit price decreases.

What about fees?

Fund managers usually charge a fee for their expert services – but these fees will vary depending on the level of management required as well as the type of managed fund. The unit price of a managed fund is calculated net of all fees and liabilities however, so there is no need to try to factor these in yourself.

Can risk impact the value of my investment?

It’s important to remember that the value of your investment may be impacted by different risks. Securities that are listed on share markets can be affected for a number of reasons including how well they perform, their strategy and management, how sustainable their earnings are – plus much more. And don’t forget: if your managed fund portfolio includes assets outside Australia, other factors (such as exchange rates) may also impact your investment returns. Make sure you fully read all disclosure documents, including the PDS, and understand the risks associated with a managed fund and it’s underlying investments prior to investing. If you don’t understand them, seek advice or ask the fund manager for more information.

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.


This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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