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.