Self-managed super funds now have more than 25 per cent of their portfolios in managed funds, eclipsing the amount held in cash and term deposits for the first time, according to a new report.
The second annual SMSF Insights report, commissioned by UBS and FSC, conducted a survey of 601 SMSFs and found that the amount invested in managed funds has increased from 15 per cent in 2014 to 25 per cent in 2015.
The allocation of the average SMSF to cash and term deposits, on the other hand, has fallen from 35 per cent to 24 per cent, the report found.
UBS Asset Management head of Australia and New Zealand Bryce Doherty said the increasing use of managed funds by SMSFs dispels the belief that holders want to actively manage their superannuation.
“People, while they want to have flexibility and control, they don’t particularly want to be having to watch markets day in, day out,” Mr Doherty said.
"This affords SMSF investors professional management via product offerings and the luxury of control and flexibility regarding product choice as well as significant opportunity for fund managers to provide access across a broad range of diversified product offerings."
The report also signalled that exchange-traded funds (ETFs) are a growing trend in the SMSF space. It was found that 20 per cent currently use the investment vehicle, while 10 per cent plan future use.
Those using ETFs indicated that the motivation is to gain access to offshore markets, something that Mr Doherty said is an "interesting development from a diversification point of view".
However, while ETF use is increasing, Mr Doherty said that the rate and pace of useage by SMSFs doesn’t correlate to the rapid growth as in the broader wealth management market.
“We thought that [ETF use] would have grown more significantly over the past 12 months than it had. There’s still plenty of education work to be done by ETF providers,” he said.
Moreover, Mr Doherty pointed out that although the concentration of investment in cash and domestic equities has reduced, the SMSF sector is still lacking when it comes to diversification.
“This year again there still is definitely a bias towards Australian equities and still large cash holdings,” he said.
FSC chief executive Sally Loane said the report also found that life stage plays a key role in dictating the level of risk SMSF holders take.
The report found, in terms of individuals in the 55-64 year age group, a more cautious and concentrated approach towards cash, managed funds, and domestic equities is prevalent.
For 55 to 64-year-olds, it was reported that an average of 24 per cent of the total invested amount was in cash/deposits. Further, 26 per cent was in managed funds, 20 per cent in domestic equities and 4.0 per cent in overseas equities.
Comparatively, “more than twice as many 18 to 44-year-olds were leveraged for property or direct equities or they were considering diversifying into international investments,” Ms Loane said.
The largest group of Australians who could be impacted by changes to franking credit refunds are members of large super funds, according to ...
A global life insurer has launched a research program with the University of Oxford to look at new approaches to income protection for more ...
A 20-year projection of different income levels confirms that lower earning retirees will be hit hardest by the ALPs proposed removal of fra...