SMSF investment analysis shows long-term deposits rising in popularity
SMSF investors are moving cash to longer-term deposits as they are left with few options in terms of liquidity, according to SuperConcepts’ Investment Pattern Survey March 2023.
The survey covers more than 4,300 funds SuperConcepts administers and the investments held on 31 March 2023.
Funds are administered daily, ensuring data is based on actual current investments. The assets of the funds surveyed represent around $7 billion.
The analysis showed that Australian equities still hold top place in the largest investment category, taking up 38.5 per cent of the total assets, while property came in second with 16.5 per cent.
Cash and short-term deposits made up 10.9 per cent down from the December 2022 level of 12.7 per cent.
As expected, all major banks, as well as BHP and Telstra, were included in top 10 largest investments for funds representing almost 12.2 per cent of the total SMSF assets. Also included were CSL and Westfarmers.
Despite increasing official cash rate settings, short-term term deposits are still unattractive and not heavily used.
There has been some use of other pooled structures to obtain higher rates of return, but this is also limited, resulting in most liquidity being managed through cash at the bank.
Australian fixed interest is predominantly split between three major investment solutions. Firstly about 42 per cent is accessed through managed funds, particularly mortgage and income trusts.
Approximately 28 per cent of funds are acquired through long-term deposits that span over a year. This rise can be attributed to the frequent increases in official interest rates, which have finally started affecting term deposits.
Interestingly, just over 30 per cent of fixed interest exposure is achieved by either hybrids, capital notes or loans with increased use of debt securities.
Australian equities still represent the largest portion of the SMSF investment pool at nearly 39 per cent. This has fallen due to the slightly negative performance of the equities market over the year. Most exposure is done by direct investment in the Australian share market.
The pooled arrangements comprise 7.4 per cent of the total investment pool but are still modest regarding the Australian equity exposure (19 per cent). There is some exposure to private company equity, but this is relatively small again. The falls in allocations for direct shares and managed funds are mainly due to market performance.
In contrast, the increases for unlisted are mainly due to timing, as there has been little revaluation since 30 June 2022.
Between managed funds and ETFs, almost 80 per cent of international equities exposure is via pooled structures. This allows SMSFs easier access to global markets as well as diversification. There is a continued increase in the use of ETFs through managed funds accessed through both listed and unlisted versions.
Nearly 85 per cent of exposure to property is through direct real property. When a property is acquired with other investors, very little is done through private pooling arrangements compared to public structures (21 per cent versus 79 per cent). All growth in the sector is in the direct category.
While the other category is broad, the highly publicised asset types like cryptocurrency and collectables continue to consist of small levels in the overall investment pool and the ‘other’ pool.
To download the report go to: https://superconcepts.com.au/
