New offer reinforces CFS' market leadership in delivering efficient solutions for advisers and their clients 


14 December 2021: Australian superannuation and investments group Colonial First State (CFS), has today launched two new geared index options through its $109 billion FirstChoice platform.


The first passively managed geared investment options to be offered by CFS have been designed to complement CFS’ existing suite of seven actively managed geared funds, adding to its range of index options available on the FirstChoice platform.


The CFS Geared Index Australian Share option and the CFS Wholesale Geared Index Global Share option, offer investors a low-cost way to boost their exposure to Australian or global share markets using borrowing within the investment products.


CFS Chief Distribution Officer, Bryce Quirk, said: “We are continuing to seeing a growing appetite from investors for passive investments.


“These funds will allow investors to use leverage to increase their exposure to global or Australian share markets via passively managed investment strategies. Using low-cost index funds as a base offers the benefits of broad market exposure, low management fees and transaction costs, and systematic processes.


“Our new offerings have also come about as a result of adviser demand for greater access to lower cost strategies, which provide the potential for significant growth in portfolios with longer investment horizons.”


The CFS Geared Index Australian Share option borrows to invest in a diversified basket of Australian listed companies. It aims to outperform the S&P/ASX 100 Accumulation Index over rolling seven-year periods before fees and taxes.


The CFS Wholesale Geared Index Global Share option aims to magnify long-term investment returns by borrowing to invest in a diversified portfolio of global shares. This option aims to outperform the MSCI All Country World Index in Australian dollar terms over rolling seven-year periods before fees and taxes.


The geared index options can borrow at institutional interest rates, which are typically lower than the rates charged on margin loans to individual investors.


“The geared index options manage debt internally, so investors don’t need to worry about margin lending applications or margin calls. There is no debt recourse at the investor level, so the maximum loss is restricted to the value of the original investment,” Mr Quirk said.


He added the geared index options would appeal to investors who have a long investment time horizon and are interested in passive investments that do not rely on the skills of investment managers to achieve the fund’s objectives.


Low-cost index funds have been gaining popularity with Australian investors. CFS has recorded almost $2 billion inflows into the CFS Index Australian Share fund and over $1.3 billion into the CFS Index Global Share fund since the start of 2020 alone. Neither of the funds include gearing.


The CFS Geared Index Australian Share option and the CFS Wholesale Geared Index Global Share option use borrowings to increase the investor’s exposure to equity market returns.


“Gearing can magnify market gains, but it is essential that investors understand that gearing will always magnify losses if the market falls,” Mr Quirk said.


“Geared strategies may not be suitable for all investors. We always recommend investors seek professional financial advice on their own personal circumstances.”

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About Colonial First State

Colonial First State (CFS) is Superannuation and Investments HoldCo Pty Limited ABN 64 644 660 882 and its subsidiaries which include Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) and Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL). CFS is majority owned by an affiliate of Kohlberg Kravis Roberts & Co. L.P. (KKR), with the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 (CBA) holding a significant minority interest.