SMSFs keeping cash for better markets
Self-managed superannuation funds (SMSFs) stored away $56 billion in excess cash during the 12 months to April 2015, the highest amount in seven years.
Billions that would have been invested if it were not for market uncertainty is reflective of a wider trend that saw more SMSFs adopt defensive investment strategies when making asset allocation changes over the past year.
Growth in the number of SMSFs has also been subdued over the last two year, with about 25,000 SMSFs established in the 12 months to March 2015. This is down by about 8,000 from the same period in 2013 and is the lowest annualised growth rate since the introduction of Simpler Super reforms in 2008.
The figures form part of annual SMSF research released jointly by Vanguard and Investment Trends on August 9th. This year’s report is based on a survey of about 4,000 SMSF trustees and 501 financial advisers.
Vanguard head of marketing strategy and communications, Robin Bowerman, said SMSF trustees currently have a bearish outlook and it is having an impact on the investment decisions trustees are making, and in turn their funds’ asset allocation.
“The large portion of assets that SMSFs continue to hold in direct shares, and the increasing levels of excess cash, present a range of issues for SMSF portfolios. The may be building in more concentration risk at a time when trustees are increasingly concerned about financial markets,” Bowerman said.
Investment Trends head of research wealth management, Recep III Peker, said although it looked like the SMSF growth rate had slowed, “it’s just an indication of how the share markets are going and how super funds have been performing.”
“ARPA stats show SMSF assets grew by 10% over the last year, but all other super assets grew by 16%. One of the main drivers behind that gap is that SMSF members are a lot older than the whole population in superannuation,” Peker said.
“Also it is the under exposure of international assets as well. They [SMSFs] have started to recognise this gap but what you’ll find is they’re prioritising diversification in their portfolios a lot more.”
SMSF allocations to listed and unlisted managed funds continued to increase, growing to 18% of total assets, up from 15% in the last year. The allocation to direct shares drifted down from 44% to 41% of total assets but direct shares maintained their position as the dominant asset class among self-managed funds.
The proportion of SMSFs using managed funds has continued to grow, reaching 43% in 2015, a level not seen since 2011. The number of SMSFs holding EFTs grew 53% in the 12 months to April 2015, with growth also reported in the number of SMSFs who intend to invest in EFTs in the coming year, up 20%.
— via the FINANCIAL STANDARD, Aug 15
