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SMSFs drive surge in direct investment

The growth of SMSFs has helped drive the popularity of direct investment and has seen a swell in the number and types of products on the market, according to one financial services company.

Analysis conducted by Lonsec shows there has been a significant growth in the number of investments catering to direct investors during the past year.

Lonsec senior investment analyst Peter Green said given that SMSFs have almost one third of their assets invested in Australian shares, it is logical there should be a strong increase in the type of products aimed at these investors.

“This surge of interest has seen a sustained rise in new listed investment companies (LICs), exchange-traded funds (ETFs) and separately managed accounts (SMAs), primarily driven by greater demand from direct investors,” said Mr Green.

He added there had been several IPOs and LICs, following a long period within the sector during which there had been virtually no new offerings and with most companies trading at a discount to net asset value in the period following the global financial crisis.

Strong returns from the Australian market and renewed interest in direct investing have seen LICs regain their trading premium and popularity, leading to a new round of IPOs, Mr Green said.

ETFs have experienced a rapid expansion in Australian in recent years, with more than $16 billion in funds under management, he added.

“We are seeing strong product innovation in this area and we expect Australia to follow the US trend with even further growth and expansion ahead,’’ he said.

SMAs are also one of the fastest growing direct investment products.

“SMAs have been gradually increasing in popularity in Australia during the past decade; however, they have a long track record in the US market,’’ Mr Green said.

“They are basically the next evolution of trading platforms, which share some of the benefits of a master trust yet allow investors to bypass the managed fund structure and own the portfolio directly in their own name.”

SMSFs drive surge in direct investment
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