Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 258

SMSFs allocating to managed funds and global

Three recent reports on asset allocation confirm a move by SMSFs and other investors into global equities at the expense of Australian companies. It is no doubt driven by the better performance of the S&P500 versus the S&P/ASX300, the surge in technology opportunities offshore and the struggles of previous favourites, the banks and Telstra.

The official statistics on the asset allocation of SMSFs as recorded by the Australian Taxation Office (ATO) from tax returns are flawed, as we have written about several times. Other data sources such as the Australian Bureau of Statistics (ABS) and market participants provide a more complete picture.

The managed fund industry

The latest ABS data for 31 March 2018 shows the Australian managed fund industry held $3.4 trillion, up $15 billion in the quarter. So much for the claims this is a struggling industry. The strongest increase by investment type was overseas assets, a rise of $21 billion, as shown below. Domestic shares fell by $18 billion.

Source: 5565.0 ABS Managed Funds, Australia, March 2018

SMSF investments move to managed funds

The just-released 2018 Vanguard/Investment Trends Self-Managed Super Fund Reports show a time series since 2012 in investment patterns. The most obvious movement is the growth of managed investments, which include ETFs and LICs, at the expense of direct shares. While SMSF trustees are making their own investment decisions, this should not be confused with making their own stock selections. The share of managed investments has doubled from 11% to 22% in six years. The latest BetaShares Australian ETF Review shows inflows into international equities of $273 million in May 2018, with this asset class first for inflows in every month of 2018 so far.

Source: Vanguard/Investment Trends Self-Managed Super Fund Reports, June 2018

SMSF asset allocation

This week, SuperConcepts also released its latest Investment Patterns Survey for March 2018. This is far more up-to-date than the ATO data because it uses SMSF data from funds administered by SuperConcepts, rather than relying on the much-delayed lodgement of tax returns.

The data needs the qualification that SuperConcepts is part of AMP and has a higher proportion of advised clients than most SMSF administrators, and advisers tend to use the functionality of platforms and managed funds. Nevertheless, the change in asset allocation also shows a greater use of international equities over time, up from 12.9% to 14.2% in a year.

A further break-up of the international shares component over the last year shows the steady rise of ETFs and managed funds, and a small rise in SMSFs going directly into foreign stock exchanges.

SMSF international shares components

The balanced options of institutional superannuation funds have long allocated around 20% of their portfolios to global equities, and SMSFs have traditionally lagged far behind. In the last five years, SMSFs have started to catch up, and with the Australian index still dominated by some big companies without compelling growth prospects, it's a trend that will continue.

 

Graham Hand is Managing Editor of Cuffelinks.

2 Comments
SMSF Trustee
June 19, 2018

It would be good to see the ranges for these, if they were available. I'm with Super Organised so my allocation can be validly compared with their data. But my allocation is quite different, so I'd love to see if I'm at the extreme of any ranges.

For example, I've got 7% in what they call "other". I'd guess that the average of 0.7% is made up of lots of funds with zero and a small proportion with significant allocations. Is 7% a large allocation, the average of the non-zeros, or a whimpish allocation from among those who go into that space?

It's great to see this data and I appreciate your comment about the difference between having an SMSF to pick stocks versus having one to hold the managed funds of your choice. I have less than 10% of my fund in direct shares (and that's been reducing over the last year or two). The vast majority is in 25 different managed funds offered by 20 different fund managers.

Great diversification, competitive fee structure, no one else to blame but me for the results - that's why I'm there.

Peter C
June 18, 2018

For the past few years I have invested in the indexed option of my industry super fund.

The international share component has ranged from 30% to 38% during this period (it is 38% now). The increase is mainly because of the natural growth and not because of a switch.

The benefit for me is, I don't have to think about it and don't start investing overseas after the prices of stocks have already increased, I've been in there for a while.

Also, because I used the indexed option the fees are significantly lower than a regular balanced option.

There is still 30% of the portfolio allocated to cash and fixed interest, so I do have a balance between growth and income assets.

 

Leave a Comment:

RELATED ARTICLES

SMSF asset allocation changes unexpected

Let’s debunk this myth about SMSFs and global shares

SMSFs drop the ball on risk in asset allocation

banner

Most viewed in recent weeks

Are term deposits attractive right now?

If you’re like me, you may have put money into term deposits over the past year and it’s time to decide whether to roll them over or look elsewhere. Here are the pros and cons of cash versus other assets right now.

Uncomfortable truths: The real cost of living in retirement

How useful are the retirement savings and spending targets put out by various groups such as ASFA? Not very, and it's reducing the ability of ordinary retirees to fully understand their retirement income options.

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

How retiree spending plummets as we age

There's been little debate on how spending changes as people progress through retirement. Yet, it's a critical issue as it can have a significant impact on the level of savings required at the point of retirement.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

Latest Updates

Property

Financial pathways to buying a home require planning

In the six months of my battle with brain cancer, one part of financial markets has fascinated me, and it’s probably not what you think. What's led the pages of my reading is real estate, especially residential.

Meg on SMSFs: $3 million super tax coming whether we’re ready or not

A Senate Committee reported back last week with a majority recommendation to pass the $3 million super tax unaltered. It seems that the tax is coming, and this is what those affected should be doing now to prepare for it.

Economy

Household spending falls as higher costs bite

Shoppers are cutting back spending at supermarkets, gyms, and bakeries to cope with soaring insurance and education costs as household spending continues to slump. Renters especially are feeling the pinch.

Shares

Who gets the gold stars this bank reporting season?

The recent bank reporting season saw all the major banks report solid results, large share buybacks, and very low bad debts. Here's a look at the main themes from the results, and the winners and losers.

Shares

Small caps v large caps: Don’t be penny wise but pound foolish

What is the catalyst for smalls caps to start outperforming their larger counterparts? Cheap relative valuation is bullish though it isn't a catalyst, so what else could drive a long-awaited turnaround?

Financial planning

Estate planning made simple, Part II

'Putting your affairs in order' is a term that is commonly used when people are approaching the end of their life. It is not as easy as it sounds, though it should not overwhelming, or consume all of your spare time.

Financial planning

Where Baby Boomer wealth will end up

By 2028, all Baby Boomers will be eligible for retirement and the Baby Boomer bubble will have all but deflated. Where will this generation's money end up, and what are the implications for the wealth management industry?

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.