Master trusts & wraps

Wrapping up your investments

Master trusts and wraps allow you to 'wrap' your investments into one package or portfolio of investments. They are generally recommended by financial advisers. There are important differences between the two. We explain how each of these structures work, their benefits and things you should know before going down this path.

What is a master trust?

A master trust is an investment structure that allows an investor to hold a portfolio of managed funds under the one umbrella. It provides centralised reporting and is often used by financial advisers as an easy way to manage their client's portfolio.

Master trusts typically have the following features:

  • Investments are held by a trustee in its name, on behalf of the investor
  • The value of an investor's account is determined by the trustee based on the value of the underlying investments
  • All fees and some taxes are bundled into the unit price for each investment and allocated  to the investor
  • Income from the underlying assets is paid to the master trust and then distributed to members
  • The underlying wholesale funds are usually specific to that master trust which means they are not portable. If you want to change to a different master trust you will need to sell your current investment and buy a new one, which may result in a capital gain, which will be taxed at your marginal tax rate.

What is a wrap?

A wrap is similar to a master trust but it allows an investor to hold investments, such as managed funds and direct shares, under the one umbrella. It is also used by financial advisers to provide centralised reporting and flexibility which may allow the investor to save costs.

Wraps typically have the following features:

  • They are operated by a trustee but the investor has a beneficial ownership of the underlying assets
  • The value of a member's investment is determined by the underlying assets
  • A wrap service uses a cash account for each member that income and expenses are passed through
  • All fees and taxes are unbundled from the unit price and disclosed separately
  • Any income from the underlying investments is paid into a member's cash account
  • Franking credits are distributed to individual investors through the cash account
  • Members' assets are portable, making it easy for an investor to change wrap services

Pros and cons of master trusts and wraps

Although master trusts and wraps have different structures, most of these pros and cons are common to both.


  • Access to wholesale funds - You can access a wide range of wholesale funds that you may not be able to access individually.
  • Cost - Having all your investments under the one umbrella may reduce your investment costs and financial advice costs as the administration service makes buying, selling, and reporting much simpler.
  • Online access - You can usually check your investments online at any time. A master trust or wrap may offer you statements every 3, 6 or 12 months but make sure you are not paying for more frequent statements than you need.
  • Portability - With a wrap service you own the underlying investments which gives you the flexibility to move them into or out of a wrap service.

Smart tip

Watch out for up-front fees when moving an existing investment to a wrap or master trust. Ask your adviser if any fees can be reduced or rebated to you.


  • Suitability - If you are only invested in one or two diversified multi-manager funds, for example growth funds, you may be incurring additional costs for an administration structure you don't need.
  • Cost - Fees may include administration fees, fees for moving money in and out, management fees for investment options and service fees from your financial adviser. Fees reduce the money you can invest and will impact the value of your investment over time so make sure you are only paying for services and features you need.
  • Lack of portability - A master trust usually consists of investments in managed funds that are specific to that master trust, which means that if you want to change advisers you may have to sell your investment, which could result in a capital gain. Ask your adviser how many advice firms use this brand of master trust. A 'unique' offering may be a disadvantage.

Master trusts and wraps are good for those who have a large sum of money to invest and want the convenience of one report for multiple investments. A wrap or master trust may be a convenient way to reduce costs and simplify reporting but make sure it is for your benefit and not just convenient for your adviser.

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Last updated: 19 Apr 2017