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University of Adelaide study reveals SMSF's superior performance during financial hurdles
Invest
University of Adelaide study reveals SMSF's superior performance during financial hurdles
The recent research conducted by the University of Adelaide has unveiled that self-managed super funds (SMSFs) have demonstrated a remarkable resilience during market downturns, particularly in the 2021-22 financial year.
University of Adelaide study reveals SMSF's superior performance during financial hurdles
The recent research conducted by the University of Adelaide has unveiled that self-managed super funds (SMSFs) have demonstrated a remarkable resilience during market downturns, particularly in the 2021-22 financial year.
Despite the challenging financial landscape, where the S&P/ASX 200 index saw a decline of more than 10%, SMSFs outperformed the APRA fund sector by a significant margin of 4.1 percentage points.
This study, spearheaded by the University's International Centre for Financial Services (ICFS), analyzed the performance of approximately 394,000 SMSFs, constituting 67% of all SMSFs. The findings revealed that 38% of SMSFs experienced positive returns during this period, in stark contrast to less than five per cent of APRA funds, marking the largest margin of outperformance in the six-year span of the research project.
Dr George Mihaylov, who is at the forefront of the ICFS research project, commissioned by the SMSF Association, emphasized the diversification strategies of SMSFs as a contributing factor to their superior performance. "In our opinion the outperformance by SMSFs was due, in part, to being underweight international equities and overweight domestic equities in a year where the local market outperformed some international markets," Dr Mihaylov stated. He further highlighted the contrast between SMSFs and APRA funds in terms of international equities, pointing out that this difference in investment strategy could enhance earnings during periods when the domestic stock market outperforms international counterparts.
Another aspect underlined in the research was the preference of a significant subgroup of SMSF trustees for defensive asset allocations and classes, which further contributed to the sector's outperformance. The study also found that, as anticipated, funds holding less than 80 per cent of their net assets in cash and cash equivalents experienced slightly exacerbated losses at the aggregate level.
Peter Burgess, CEO of the SMSF Association, reinforced the importance of the research, articulating the strong investment performance of the SMSF sector over recent years. "This research contributes to the mounting evidence on the strong investment performance of the SMSF sector," Burgess said. He also addressed the discrepancy between the median investment returns reported by the Australian Taxation Office and those presented in the study, clarifying that the methodology and data inputs utilized by the University of Adelaide offer a more accurate comparison with the APRA fund sector. Burgess further endorsed the value of professional financial advice for SMSF trustees, noting, "From the Association’s perspective, what is particularly gratifying is the indication that those SMSFs getting financial advice tend to perform better."
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