According to new research by CoreData, self-managed super funds (SMSFs) are heavily invested in Australian equities, although their allocation varies considerably depending on whether they are self-managed or have an adviser.
Almost 50 per cent of assets held in the Australian SMSF universe are in Australian equities, but the sector also has strong exposure to cash and term deposits and residential property.
Interestingly, however, SMSF trustees with an adviser tend to have more diversified portfolios and a lower exposure of Australian equities.
“The study shows clear differences in asset allocation between SMSFs as a whole and those that are advised,” Angus Dennis, senior consultant at CoreData, stated. “Advised SMSFs tend to have some more diversity in terms of sector weights, with higher allocation to international shares, fixed income and residential property.”
The level of cash and term deposits, which has traditionally been higher than the larger superannuation funds, shows signs of change.
“The recent reduction in cash rates to record levels by the Reserve Bank appears to be giving SMSF trustees and their advisers cause to consider shifting some funds to other sectors”, Mr Dennis said.
“The interesting shift from cash and term deposits is more evident in the group of advised SMSF trustees, although all SMSF trustees are considering moves.”
In addition, the research found that insurance within SMSFs is showing strong signs of growth, with 27 per cent of SMSF trustees having insurance within their fund, up from 13 per cent in 2010.
“Growth of insurance within SMSFs appears to have been meaningful within the last three years,” Mr Dennis said, adding that “for SMSF trustees the top reason stated for uptake of insurance was that it is more financially and tax efficient to have insurance within the SMSF.”
Perhaps most importantly, SMSF individuals are showing increasing demand for control to accompany their stronger investment knowledge.
“In terms of investments generally, it is evident that as the preference for financial control of SMSF trustees rises, so too does the investment skill of the SMSF trustees,” Mr Dennis stated, pointing out that “service providers need to clearly bear in mind the investment skills of SMSF trustees in their offering”.
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