Philip La Greca, executive manager, SMSF technical and strategic solutions at SuperConcepts, said understanding the differences between investment trends of SMSF and APRA funds can be important for anyone considering moving from an APRA-regulated fund to the self-managed option.
“SMSF trustees, and those considering setting up an SMSF, often wonder how their investment options stack up against those of APRA-regulated funds,” he said.
In February 2023 SuperConcepts released its quarterly SMSF Investment Patterns Survey which analyses the investments held by over 4,400 SMSFs as of 31 December 2022. This was followed by the publication of APRA’s Quarterly Performance Report analysing investments for the same period.
The two reports provide a comparison of the overall asset allocation breakdown for SMSFs and APRA funds.
SuperConcepts found that SMSF funds are carrying more cash, Australian equities and property investments than APRA funds.
In its own analysis, SuperConcepts found that cash and short-term deposits accounted for just over 12 per cent of SMSF portfolio, while for APRA funds it was only nine per cent.
Holdings in Australian equities for SMSF was 38.8 per cent while for APRA funds it came in at 27.6 per cent and for property investments, SMSFs recorded 16.4 per cent, double the 8.2 per cent in APRA funds.
“It is unsurprising that SMSFs hold a greater amount of cash and liquid assets. This can be attributed to a larger percentage of SMSF members being in pension phase, and a comparatively lower level of positive cash flow resulting from contributions,” Mr La Greca said.
“APRA funds exhibit higher exposure to international markets, which is evident in their fixed interest and equities percentages. It is noteworthy, however, that the total equity exposure is almost identical when both Australian and international markets are combined.”
Mr La Greca explained that the disparity between the two streams stems from an APRA funds’ capability to access foreign markets and their recognition of the constraints imposed on their market dominance in certain Australian markets.
“The contrast can be largely attributed to their respective access to distinct markets,” he said.
“Specifically, APRA funds have better access to international fixed interest and infrastructure markets, whereas SMSF trustees are attracted to real property investments.
“Their respective access to different markets, and the investment preferences of SMSF trustees, contribute to these results.”
