The volatile markets have driven trustees to significantly reduce their exposure to the top 10 ASX stocks, with many trustees turning instead to small and mid-cap stocks, according to fresh research from SuperConcepts.
The SuperConcepts SMSF Investment Patterns Survey, which coves approximately 2,900 funds, showed that investment in the ASX top 10 stocks by SMSFs fell from 20 per cent of assets at 31 March 2015, to 14 per cent at 31 March this year.
Phil La Greca, SuperConcepts' executive manager of technical and strategic solutions, said a significant amount of SMSF trustees have diversified away from Australia’s largest stocks, but rather than investing in different assets classes, they are investing in mid and small caps on the ASX.
“It has been an effective strategy with the strong performance of smaller companies on the ASX helping to drive better returns than the index for SMSF trustees,” said Mr La Greca.
The trend to invest in other stocks on the ASX has seen the overall allocation to Australian shares increase marginally from 35.4 per cent to 35.8 per cent over the first quarter, according to SuperConcepts.
“While many trustees have benefited from this approach, there still remains an opportunity to further improve diversification with SMSF trustees continuing to be heavily weighted in domestic equities,” said Mr La Greca.
The survey showed that during the March 2016 quarter, investments in international equities decreased slightly from 12.9 to 12.6 per cent while funds invested in fixed interest remained steady at 12.3 per cent.
It also showed that contribution levels to SMSFs in the March quarter were at the lowest level in two years with the average contribution inflow per fund $5,426, down from $6,393 the previous quarter.
“While we typically see a decline in SMSF contributions during the March quarter, this year has been particularly low,” he said.
"This could be a result of concern about speculation on proposed superannuation changes, which was top of mind for many trustees during the quarter,” Mr La Greca said.
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