Diana Clement: Keeping close eye on net income

The idea that you can buy managed funds much in the way you'd pick your groceries off a supermarket shelf isn't all that well known here.

Yet in the United States, United Kingdom and other countries it's common for investors to shop at online "fund supermarkets", making their own investment judgments and, in return, paying lower fees - which can aid in the long-term growth of investments.

The launch of RaboPlus Investments here, from one of the world's biggest banks - Rabobank Group - was barely noticed in the media. The bank's fund supermarket will initially offer a mere 10 funds, from three fund management companies: AMP Capital Investors, Asteron and Tower. The funds can be bought, sold and managed online using a portfolio tool on RaboPlus' website.

RaboPlus general manager Mike Heath says some of the funds on offer are wholesale funds and not normally available to private investors. Others have a lower investment minimum via RaboPlus. The bank also offers discounted fees and an online portfolio tool, which allows you to view the prices of your investments 24/7. Typical fees are 0.75 per cent entry fee (compared with anywhere between 1 per cent and 5 per cent via more traditional investment routes) and 1 per cent annual management fee.

Heath says the plan is to extend the offering as time goes on to other funds that meet the RaboPlus criteria - which includes having a Morningstar rating of at least three stars.

RaboPlus isn't the only way to invest directly into managed funds. MoneyOnline.co.nz also provides an internet-based fund supermarket on a much wider range of funds than RaboPlus. It offers discounts on the entry fee that range from 0 to 100 per cent of the initial charge. Investors can track their fund and equity investments online using the MoneyOnline.co.nz portfolio manager - which updates fund prices weekly.

It's often said that private investors need professional advice. However, MoneyOnline director John Commins says that's putting people "into a box". "There is a whole spectrum of investors," he says. "Some can do it on their own and, at the other end of the spectrum, people need help."

It's a view shared by AMP Capital Investors, which is offering funds via RaboPlus. Relationship management chief Anthony Edmonds says a segment of the market prefers to deal directly online.

Even so, one of the biggest problems here for direct investors is that they don't have access to analyst reports, decent charts and other data about the funds they want to invest in. That puts them at a significant handicap to financial planners and stockbrokers.

In the US, UK and other countries, it's commonplace for investors to buy their mutual fund holdings via self-service online fund supermarkets provided by several competing companies such as Fidelity's FundsNetwork. The site offers a choice of 4500 funds from 350 US fund companies - including Fidelity.

It has online tools to help private investors make their own decisions, such as a Fund Evaluator, and a Portfolio Analysis Tool. If for argument's sake, you choose to buy units in the Transamerica Premier Equity fund, it is possible to view a chart of its performance (not that past performance is an indicator of future performance), a biography of the fund manager, the complete prospectus, annual report, Morningstar rating, and detailed management fees.

A US-based investor who wanted to invest in Transamerica Premier Equity fund could also Google the fund and find the latest analyst research from Lipper and EconomicInvestor, downloadable for less than US$10 each. Or for US$135 a year, the investor could get annual access to Morningstar.com's analyst reports.

In the UK at Interactive Investor, you can view all your assets: shares, funds, cash deposit totals and property in a single online portfolio. In the case of shares and funds, you can also click buttons that allow you to view charts of performance, read the latest company news, compare against other funds, or discuss the fund or equity with other investors.

Although private investors here cannot get their hands on analyst research at present, there are some useful websites such as Goodreturns for fund news and Sharechat to discuss funds with other investors.

The really good news for private investors is that Morningstar plans later this year to launch a new website here similar to the US one - which will give private investors access to more powerful investing tools as well as access Morningstar research. Sales head Chris Cloete says the New Zealand website will be a similar offering to that of Morningstar.com's offering to US investors.

"We have to get our heads around exactly what we can provide," says Cloete. "The New Zealand market has different mechanics operating." In the US, funds face far more stringent regulation by the SEC and have to disclose more information publicly than New Zealand funds have to - funds have to disclose their portfolio holdings, which is not the case here.

The US site offers several free research tools or, for paying customers, access to fund analyst reports, a Portfolio X-Ray, which provides an "under-the-hood" review of your holdings, and screen tools allowing you to construct customised searches helping you find the shares and funds you want to buy.

But this is academic at the moment because local investors simply don't have such sophisticated tools available.

If, as a private investor, you want to learn more about Fisher Funds Fledgling Fund, then the options are limited. The investment statement is available on Fisher Funds' website. A star rating, details of returns, ranking and basic investment details such as the management expense ratio (the true amount you pay in fees including annual management fees and other buried ones) are on Morningstar's website. At Fundsource.co.nz, there is a performance chart, basic fund details and fee information.

Hugh Fisher, director at Fisher Funds, says a fair number of private investors simply call up and speak to the fund manager, Carmel Fisher. "She gets calls [from private investors] daily. I'm not sure that is something you could do with ING, Tower or another big player. But you can with a boutique [operator] like Fisher Funds."

Many commentators say managed funds available in New Zealand do not provide good value.

But if current proposals to put a capital gains tax on overseas investments from April next year go ahead, then it's likely there will be a flow of small investors' capital back to New Zealand.