Tom Willis is an award-winning marketing leader and Co-founder of Lawpath. Tom’s journey journey includes steering several entrepreneurial projects and addressing the unique challenges faced by small businesses. As the Chief Marketing Officer at Lawpath, Tom has been pivotal in shaping the company’s marketing strategy and business growth.
Introduction
Nowadays everyone is looking at different options for investing their extra income so they can hopefully return a profit. Some of those options are stock, property, cryptocurrency, etc. Another option available is known as a managed investment scheme (MIS). This article will run through what an MIS is and how they work in general.
What is a Managed Investment Scheme (MIS)?
For an in-depth definition of what a managed investment scheme (MIS) is you can have a read of section 9 of the Corporations Act 2001 (Cth).
Essentially, an MIS enables a group of investors to pool their money together for the purpose of investing to produce a profit. Often referred to as managed funds or collective investments, an MIS must have 3 particular features:
- The money invested is recognised as consideration to acquire rights (interests) to the benefits that are produced from that scheme
- All the investments are pooled together for a common purpose to produce benefits. These may be financial or rights/interests in property
- Investors are not involved in the day to day operations of the scheme
Important to note that in general only investments that are ‘collective’ are recognised as MIS. Some examples that are not MIS include:
- Regulated superannuation funds
- Approved deposit funds
- Debentures issued by a body corporate
- Barter schemes
- Franchises
- Direct purchases of shares or other equities
- Schemes operated by an Australian bank (e.g. term deposits)
So, the asset classes that an MIS can invest in are wide in variety. As a result, the most popular schemes include:
- Trusts (Property, Cash Management or Equity)
- Agricultural schemes
- Timeshare schemes
- Mortgage schemes
Registered v Unregistered
An MIS can be either registered or unregistered depending on the structure. Despite that, all MIS must be operated by a manager with an Australian Financial Services Licence (AFS Licence) authorising to run that scheme. Therefore, an MIS must register themselves with the Australian Securities and Investments Commission (ASIC) if:
- 20 or more members
- Promoted by a person who is in that business of promoting MIS
- ASIC requires the scheme to register themselves
If these are not applicable to an MIS, they do not require registration with ASIC. If you’re investing in an unregistered MIS be careful and ensure that the scheme is for you after understanding it.
Advantages and Disadvantages of MIS
| Advantages | Disadvantages |
| Diversification | Potentially higher fees than other investment types |
| Access to broad range of assets/markets | May not be able to convert investment into cash easily |
| Allowed to make regular contributions | Reliant on skills of other people |
| Reduce paperwork & make tax return easier | Do not control investment decisions |
Steps to invest in a Managed Investment Scheme (MIS)?
The ASIC Money Smart site indicates how you go about to invest in such a scheme. You can buy them directly from the fund manager, financial adviser or an online broker. The overall steps are:
- Choose an MIS
- Buy & sell your MIS
- Keep track of your MIS
Conclusion
Have a read of an earlier blog post, 5 Questions You Should Ask When Hiring an Investment Lawyer. This post indicates the questions that need to be considered before going ahead with an MIS and hiring an investment lawyer for that purpose. When it comes to investments, MIS is a popular option amongst investors and it might be the one for your portfolio.
Unsure where to start? Contact a LawPath consultant on 1800 529 728 to learn more about customising legal documents and obtaining a fixed-fee quote from Australia’s largest legal marketplace.
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