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ETFs a potent asset allocation tool for SMSFs

By Sarah Kendell
05 December 2019 — 1 minute read

ETFs can be used to help planners have broad asset allocation conversations with their SMSF clients, who are too often still highly concentrated in a few key large-cap Australian stocks as well as cash and property, according to BetaShares.

Addressing the launch of the BetaShares/Investment Trends ETF Report 2019 in Sydney on Wednesday, BetaShares managing director Alex Vynokur said the ETF provider had seen a rise in uptake of more emerging categories of exchange traded products such as fixed income as advisers sought to impress the value of good asset allocation on their SMSF clients.

“Evidence is showing in every market around the world that asset allocation is explaining around 90 per cent of our returns, so if investors are going to spend any time looking at their investment portfolio, they really need to focus on getting asset allocation right,” Mr Vynokur said.

“ETFs enable that conversation much more easily — they enable people to focus on the big picture and take away the attention from the relatively low-value conversation of this stock versus that stock or this manager versus that manager.”

According to BetaShares statistics, fixed income and international equities ETFs had been the most popular categories among Australian investors in 2019, accounting for 30 per cent and 25 per cent, respectively, of total ETF flows.

“This data is showing some of the ways ETFs are being used as a way to implement asset allocation and get the big picture right,” Mr Vynokur said.

“As much as we are excited about the fact that the ETF industry has grown as much as it has, in Australia for an average SMSF, 78 per cent of their retirement savings are still invested in a mix of Aussie equities, cash and property, and when we talk about Aussie equities, it’s not even that diversified.”

According to the report, total numbers of ETF investors in Australia had risen to 455,000 as at August 2019, eclipsing Investment Trends’ prediction of 437,000 made in last year’s report. The industry now boasted a market capitalisation of $57.2 billion at the end of October 2019, representing 40 per cent growth over the last year.

SMSF investor numbers also continued to grow, with 135,000 SMSFs holding ETFs in their portfolio as at August 2019, up from 120,000 in October 2018. However, as non-SMSF investors continued to pour into the market, the SMSF sector now represented 30 per cent of total ETF investors, down from 41 per cent in 2015.


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