Trustees are looking to cash as a risk reduction strategy, a joint report from the Self-Managed Super Fund Professionals Association of Australia (SPAA) and Russell Investments' has found.
"Right now, people are flooding to cash as they see that as the safest haven," Russell Investments managing director Patricia Curtin said at the 2012 SMSF SPAA conference in Sydney.
The report, 'Intimate with Self Managed Superannuation', shows that focus on risk reduction is the key driver of asset allocation in 2011, overtaking cost and return.
The proportion of SMSF trustees who believe equities are too volatile has doubled to one third this year, up from just 17 per cent in 2010.
Only 6.3 per cent say they haven't had time to invest their cash but plan to do so in the coming year, down from 14.4 per cent in 2010, the report found.
Concern over the volatility of equities is pushing people further toward hoarding cash.
"We asked people, why do you hold cash? And [they said], the two key reasons for holding cash are, number one, reducing my risk, and secondly, waiting for a better option. Now that has actually turned on its head from last year," Curtin said.
"I think what we have to do is understand why people are using cash as a risk reduction mechanism.
"Is it through fear or fact? How can you bridge that gap between what is noise and what is fact? I think that is a key role in the industry, as advisers but also as a fund manager."
Trustees need better advice and guidance from professionals about fixed income in portfolios, and the impact of using high allocations to cash as a long term risk reduction strategy, she said.
The study was commissioned by Russell and SPAA and conducted by independent research group CoreData.
It surveyed SMSF trustees, non-trustees and professional SMSF advisers during November and December 2011.
In total 1,406 Australian consumers were surveyed, of which 337 were SMSF trustees and 174 were high net worth individuals (HNWIs) without SMSFs.
A second survey was conducted with professionals in the area. In total, 513 responses were recorded from advisers and accountants.
To view video coverage of the 2012 SPAA SMSF National Conference, please visit InvestorDaily's video page.
