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Managed funds trumping cash for SMSF investors, research shows

SMSFs now have more than 25 per cent of their portfolio in managed funds, eclipsing the amount held in cash and term deposits for the first time, according to new research.


The second annual SMSF Insights report, commissioned by UBS and the Financial Services Council (FSC) and based on a survey of 601 SMSFs, revealed 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.


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 revealed that exchange-traded funds (ETFs) are becoming more prominent in the SMSF space. Twenty per cent currently use this investment vehicle, while 10 per cent plan to 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 the growth in use by SMSFs does not correlate to the rapid growth being seen 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.

Mr Doherty added that while the concentration of investment in cash and domestic equities has been 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 study also found that stage of life plays a key role in determining SMSF holders' level of risk.

The report found that individuals aged between 55 and 64 had a more cautious and concentrated approach towards cash, managed funds and domestic equities.

For this age group, an average of 24 per cent of the total amount invested was in cash/deposits, while 26 per cent was in managed funds, 20 per cent in domestic equities and 4 per cent in overseas equities.

By contrast, “more than twice as many 18-44 year olds were leveraged for property or direct equities or they were considering diversifying into international investments”, Ms Loane said.

Managed funds trumping cash for SMSF investors, research shows
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