Asset allocations of SMSF investments across the 2018 financial year have revealed the impact of new legislation and market conditions on the strategies of fund trustees.
The latest Investment Patterns Survey of 2600 SMSF funds by SuperConcepts shows cash, fixed interest, and property allocations have dropped, while shares and Exchange Traded Funds are up amid growing exposure to International Equities.
Cash and short-term deposits dropped from 19.8% in June 17 to 17.3% in June 18.
“Cash was always higher than expected due to the legislative changes that gave personal concessions, so the drop in cash allocations doesn’t surprise us because SMSFs are active investors,” says Phil LaGreca, SuperConcepts Executive Manager of SMSF Technical and Strategic Services.
“It looks like once trustees got the benefits from legislative change, they’ve invested in shares and equities to give their fund the best chance in terms of performance.
“Fixed interest has been tracking down since March, but it’s not significant and we can probably expect that to change as interest rates start climbing,” says Mr LaGreca.
The top 10 listed securities trustees invest in represent 11.9% of total investments, down from 13.4% during the June 2017 quarter.
“During the last few quarters trustees have gradually reduced their exposure to the top 10 listed securities, which represent just less than 33% of all trustees Australian Equity holdings,” says Mr LaGreca.
Exposure to International Equities increased from 14.2% to 14.4%.
“When looking at performance in the different sectors and currency movements, the theoretical allocation should have been 14.9% if trustees would have left their allocation unchanged for the quarter,” says Mr LaGreca.
“This gap is sourced by the payment of distributions on 30 June from the international managed funds which are reflected in the performance but removed by ex-distribution prices.
“Managed funds continue to be the most popular way for trustees to obtain international exposure, though the use of ETFs is steadily growing,” says Mr LaGreca.
The overall allocation to Managed Funds increased from 20.3% to 20.7% for the quarter.
“The split continues to show pooled structures are the preferred method of investing in overseas markets due to the complications still present in investing overseas directly,” says Mr LaGreca.
Investment using ETFs represents 4.7% of all assets during the June quarter. The ETF allocation has showed a consistent increase over the past years.
“ETF’s are mostly heavily used in the International Equity sector, representing 16.7% of all International Equity holdings,” says Mr LaGreca.
“ETFs are growing as a way for people to access international stocks and it’s worth watching for any potential volatility with US trade agreements being renegotiated, and the effect of strong currency fluctuations in certain markets.
SuperConcepts undertakes a quarterly analysis of its SMSF client investments to get a closer insight into how SMSF trustees invest and to identify emerging investment trends.
The survey covers 2,600 funds, a sample of the SMSFs SuperConcepts administers and the investments they held at 30 June 2018.
Funds are administered on a daily basis which ensures data is based on actual investments and is completely up to date. The assets of the funds surveyed represent around $3.2 billion.
Media contact:
Garth Montgomery
0408 864 851
garth.montgomery@superconcepts.com.au
