Understanding managed fund distributions – what 30 June means for you
What does 30 June means for investors in managed funds? While the broader public may focus on tax returns and winter holidays, investors — particularly those in actively managed equity funds like those offered by Montgomery — may notice distributions being paid around this time.
This article outlines what a managed fund distribution is, what contributes to it, how it affects your investment, and a few common questions we receive from investors this time of year.
What is a managed fund distribution?
A distribution is the payment of income generated by a managed fund to its investors (also called unit holders). This income typically includes:
- Dividends received from shares held within the portfolio (often including franking credits for Australian equities).
- Realised capital gains or losses — profits (or losses) from buying and selling investments within the fund.
- Interest income — earned on cash or fixed-income holdings within the strategy, such as exchange traded funds (ETFs) or term deposits.
These earnings are accumulated over the period and then paid out according to the fund’s distribution schedule — which may be quarterly, semi-annually, or annually.
For example, The Montgomery Fund, which invests in Australian and New Zealand listed companies, may receive dividends, realise gains on investment sales, and collect interest on held cash. All these components are added up and can be paid out to investors as a distribution twice a year for the periods ending 30 June and 31 December.
How is a distribution calculated and paid?
The total distribution is the sum of the fund’s realised earnings over the period and is expressed in cents per unit (CPU).
If the fund pays a 5.0 CPU distribution and you hold 10,000 units, you would receive $500 ($0.05 cents x 10,000 units) (before any applicable tax).
Once a fund goes ex-distribution, the unit price falls by exactly the value of the distribution — similar to how listed companies operate on the ASX. This ensures the value of the payout is removed from the fund’s unit price to prevent “double counting.”
Important note: no pro-rata for distributions
This is a key point many investors miss:
- If you invest just before the ex-distribution date (e.g. 28 June), you’ll receive the full distribution — even if you’ve only been invested for a day.
- Conversely, if you sell units before the ex-date, you will not receive the distribution — including any associated franking credits, if applicable.
This can impact your tax position, so timing matters — particularly for taxable investors.
Common investor questions
Why do distributions vary so much from year to year?
Distributions are made up of many moving parts: dividend income, trading gains/losses, and interest income — all of which can vary depending on market conditions and investment decisions.
If market performance has been subdued or if the fund hasn’t sold assets at a profit during the period, the realised earnings may be lower — and the fund might pay a smaller (or no) distribution.
This doesn’t necessarily reflect poor performance — it simply means the fund hasn’t realised income in that specific period.
What do distributions mean for total return?
Distributions are a part of total return and are designed to increase overall return, even if a fund’s net asset value (NAV) or unit price doesn’t move.
If you reinvest your distributions (instead of taking them as cash), you benefit from compounding growth which boosts long-term returns. However, when a fund pays a distribution, its unit price falls by that amount (since cash is leaving the fund). This may look like a loss, but it’s not, it’s just money being returned to you.
For example: the unit price starts and ends at $10, but it pays a $1 distribution. The price return is 0 per cent ($10 unit price stays the same), but the total return is 10 per cent or $11 ($1 paid back to you).
Does a fund with no distribution mean it’s underperforming?
Not necessarily. Many of our equity funds are growth-oriented and aim to deliver returns over the medium-long term, rather than targeting income alone.
While a lack of distribution may seem like a red flag, it’s important to consider:
- Has the unit price increased, delivering capital growth?
- Does the fund continue to meet its investment objective?
Remember: total return = income + capital growth. If the unit price has appreciated, investors may still benefit even without a cash distribution. And if income is needed, investors can choose to redeem units to generate cash flow or consider income focused investments such as our Private Credit funds.
Should I wait until after the distribution to invest?
This depends on your personal/investment entity tax circumstances:
- If you’re a taxable investor, you may wish to wait until after the ex-distribution date, particularly if a large distribution is expected — since that income would be assessable for the current financial year. However, once the distribution has been made and the unit price/NAV decreases from cash returning to investors, this could present an opportunity to enter at a lower price.
- If you’re a non-taxable investor (e.g. a retiree in pension phase), this may not matter as much, and delaying your investment could lead to missed market opportunities.
There’s no one-size-fits-all answer — we recommend speaking with your accountant or financial adviser before making timing decisions around 30 June.
Final thoughts
Distributions are a normal and expected part of investing in managed funds. Understanding how they work — and what they mean for your total return and tax position — helps you make better long-term decisions.
If you’d like help understanding how this year’s distribution affects your investment, or would like to discuss income strategies more broadly, please reach out to our team.
For more detail on the tax treatment of managed fund distributions, visit the Australian Taxation Office (ATO’s) website on managed investment trusts.
Disclaimer:
The issuer of units in The Montgomery Fund (ARSN 159 364 155) (Fund) is the Fund’s responsible entity Fundhost Limited (ABN 69 092 517 087) (AFSL 233045). The Product Disclosure Statement (PDS) contains all of the details of the offer. Copies of the PDS and Target Market Definition (TMD) are available from Montgomery Investment Management (02) 8046 5000 or at www.montinvest.com and at https://fundhost.com.au. An investment in the Fund must be through a valid paper or online application form accompanying the PDS. Before making any decision to make or hold any investment in the Fund you should consider the PDS and TMD in full. The information provided does not take into account your investment objectives, financial situation or particular needs. You should consider your own investment objectives, financial situation and particular needs before acting upon any information provided and consider seeking advice from a financial advisor if necessary. You should not base an investment decision simply on past performance. Past performance is not an indicator of future performance. Returns are not guaranteed and so the value of an investment may rise or fall.
Rhodri joined Montgomery Investment Management in August 2024 as an Account Manager for Private Clients.
Rhodri has worked within equities advisory, private wealth, and alternative investments for 4 years across London, Dubai and Australia. Rhodri holds a Master of Science (Business Management and Accounting) and a Bachelor of English Literature from Cardiff University, Wales.
For private client enquires, contact Rhodri on (02) 8046 5000, or by email.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
