Illiquid assets reduce SMSF risk, says Charter Hall
Holding illiquid property assets within an SMSF can reduce risk since investors will not sell irrationally when markets turn, according to property group Charter Hall.
Speaking at a media event in Sydney, head of Charter Hall direct property Richard Stacker said having a proportion of an SMSF locked up in an unlisted property fund is likely to generate higher yields and restrain trustees from pulling their money out at the wrong time.
“If [trustees] can get their money anytime they like or when the market turns quickly, often that’s just increasing their risk if they jump at the wrong time,” he said.
Mr Stacker argued that while an SMSF trustee in the pension phase may require greater liquidity than someone in the accumulation phase, a 10 per cent allocation in an illiquid asset would still be easy to manage.
“A 10 per cent allocation with yields of seven and a half per cent is still very attractive, we think,” he said.
The SMSF Association's director of technical and professional standards, Graeme Colley, agreed and added that a diversification of assets in the fund would sort out cash flow issues anyway.
“If there are only a small proportion of assets locked up, it’s really not subjecting the fund to that much greater risk,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.