Question: Ninety percent of my wife’s personal share investment comprises CSL shares. We are likely to sell a jointly owned investment property in the 2018/19 tax year, thus CGT will be due on that sale. My thoughts are to sell approximately 200 CSL shares (still leaving a significant number) in this financial year, pay the CGT due, and recontribute the funds to repurchase CSL within the SMSF of which my wife is both a member and a trustee.  Can you see any downside to this strategy?

Answer (By Paul Rickard): I can’t see anything obviously wrong with the strategy. Clearly, there is a timing/execution risk in that your sell price might be lower than the re-purchase price.

Question: Do you think the current correction presents a good “value” buying opportunity into Altium (ALU) @ $14.70?

Answer (By Paul Rickard): The stock (Altium) is certainly a little cheaper than it was a few weeks ago – so on that basis, the correction is an opportunity.

That said, I am not sure that I want to commit funds to a stock trading on a multiple of 56.2 times forecast FY18 earnings and 49.3 times forecast FY19 earnings.

According to FN Arena, the consensus target price is $14.70 – well below yesterday’s closing price of $18.98.

Question: With a direct investment in equities one can rely on the regulatory regime imposed by the ASX, but I am not sure that there is a similar regulatory regime in place for managed funds. Indeed, it seems that in some situations an investor may be handing over a large sum of money without necessarily knowing where it has been invested. Obviously, there is risk attached to any investment and I accept that, but I would like to be sure that there is not also a risk of fraud.

Answer (By Paul Rickard): There is a regulatory regime for managed funds. It is administered by ASIC under the Corporations Law. In brief:

1. a) Funds can only be offered by Responsible Entities (RE);
2. b) Each RE must have a minimum amount of capital;
3. c) The RE must have an approved compliance plan, (usually with an Independent Compliance Committee);
4. d) And funds must submit annual returns to ASIC, engage auditors for the compliance plan, have responsible managers etc

While fraud is an issue in any business, I don’t share your concerns about this when it comes to managed funds.

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