Like wrap accounts, master trusts are a type of administration platform providing simplified
administration, consolidated reports on your investments (making it easier to analyse performance and
manage tax) and a menu of investment choices.
Generally, there are two types:
(a) discretionary master trusts where the individual investor selects the underlying investment
product(s) from a list drawn up by the master trust manager or promoter; or
(b) fund of funds, where the investor selects a general risk profile, for example, â??balancedâ?? and
the master trust manager or promoter selects the underlying investments from among a range of
products managed by one or more managers.
How is a master trust difference to a wrap account?
The key differences between master trusts and wrap accounts (or IDPSs) lie in the portability of the
underlying investments, certain taxation aspects and the degree of sophistication offered.
In many master trusts the underlying investment options are specific to that master trust and are
held by a trustee on your behalf. This means that you have to sell the underlying investments in
one master trust to invest in another master trust. This potentially triggers capital gains tax.
In most cases investment wrap accounts are a custodial service and the underlying investments
are held in your own name. So, investors who have an investment in one wrap could â??in specieâ?
transfer it to another wrap without triggering a change of ownership or capital gains tax.
Another difference lies in the sophistication – wrap accounts are more sophisticated versions of master
trusts offering many more investment choices. They may cost a little more however.
See wrap accounts and invest directed portfolio service and investment platforms.« Back to Glossary Index