Should I register a Managed Investment Scheme?

In essence, a Managed Investment Scheme (MIS) is an investment structure where individuals come together to invest in a common pool of assets. If this pooling involves more than 20 members, Australian law necessitates its registration as a “managed investment scheme”. The Australian Securities and Investments Commission (ASIC) oversees these MIS to ensure investor protection and uphold market integrity.

Crypto projects that are raising via an ICO, by nature, seek to raise capital from the public to fund a particular project through the issue of crypto-assets such as tokens. So that means, if the crypto-asset issued by the ICO, is a financial product and involves more than 20 members pooling together to invest, it will need to be registered as a MIS.

One thing to keep in mind, is that the very essence of a MIS is its ability to provide investors with protection and access to a professionally curated portfolio of assets. This isn't just about pooling together funds, it’s about investor’s receiving professional expertise. We saw what happened during the ICO boom, nearly 95% of NFTs became worthless, which led to staggering investor losses. 

By pooling resources, investors gain access to a diversified portfolio, reducing the impact of poor-performing assets. To add an extra layer, professional fund managers are the ones making informed decisions, potentially leading to higher returns. And the other benefit is liquidity. Investors buy or sell units in the MIS, providing liquidity and flexibility whereas a direct investment into an asset might be a lot more challenging to sell. And finally, MIS are managed by responsible entities licensed by ASIC. So you can be certain the scheme will run and in line with regulations.

There are a few types of MIS in Australia:

• Managed Funds: Invite investors to contribute to a pool which is strategically invested across diverse assets like shares, property, bonds or digital assets. Each investor gets units or shares representing their stake in the total assets. It should be noted that Managed funds are a subset of MIS and focus on financial assets. Whereas a MIS is the umbrella term and can focus on many other asset types. 

• Real Estate Investment Trusts (REITs): Allows investors to tap into the property market without actually buying physical property, but by rather buying units in the REIT that owns properties.

• Cash Management Trusts: These schemes focus on short-term investments, aiming to preserve capital while providing liquidity.

Australian is well known for is strict financial regulations and MISs are no exception. Instituted by ASIC, MIS are regulated to safeguard investor interests and ensure transparency in financial operations. A responsible entity that oversees the MIS, must be licensed to ensure the MIS is run properly with appropriate disclosure mandates. This ensures an investor well-informed of all relevant details of the investment and they know exactly what they’re getting int

What makes a MIS so attractive is also its ability to give investors exposure to different asset classes. For example, infrastructure. Have you ever thought of investing in a toll road or an airport? Alternative Assets is another asset class. They cover everything from impact assets to private equity and venture capital to cryptocurrencies.

Managed Investment Schemes are starting to play a crucial role in Australia’s fund management sector especially for new digital asset projects. Understanding that regulation is a necessary step in ensuring individual investor protection, empowers investors to make more informed decisions. And for digital assets to flourish, investors must be confident in what they are investing in and a MIS provides the safest and most regulated avenue. 

Australia's fund management landscape is transforming, with Managed Investment Schemes (MIS) becoming a crucial hurdle for innovative digital asset projects. While recognising the importance of regulations for investor protection, savvy investors must understand that this fosters informed decision-making. For digital assets to truly thrive, investor confidence is necessary. MIS offers the most secure and regulated pathway, empowering investors to confidently navigate this new digital assets frontier.