Term deposit reforms see SMSFs eye bonds, managed funds
While cash remains a favourite among SMSF investors, one fund manager has cited increased incidences of SMSF investors looking to vehicles like ETFs to circumvent new regulations governing term deposits.
Although ATO statistics illustrate that direct cash holdings still compromises a large portion of SMSF portfolios, cash and bond ETFs have become seen an uptick in popularity within the BetaShares client base, according to its chief executive Alex Vynokur.
“SMSF investors are definitely looking to improve the returns that they're getting on cash, and what we've seen is bond ETFs being used quite often as a substitute to term deposits,” he said.
The BASEL III regulatory reforms, he said, have meant that most investors are unable to break term deposits anymore and so they’re effectively locked into that term deposit. Conversely, vehicles like ETFs are traded on the ASX so investors can buy and sell them at any time with no sorts of requirements to tie up capital.
One of the key reasons SMSF investors keep cash in their portfolio is to keep their powder dry, Mr Vynokur added, so that they can take advantage of opportunities as and when they come up.
“So if you are for example, invested in a six-month term deposit because you're hoping to achieve a slightly better return than what you might be getting at call, and an opportunity comes up, you won't necessarily be able to unlock that money because it's tied up so definitely,” 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.