Changes to concessional cap allowances for SMSFs will see trustees investing close to a billion dollars a month into Australian equities, according to one global financial services provider.
Speaking in Sydney last week, Credit Suisse Australian equity strategist Hasan Tevfik said increases to the concessional cap for SMSFs will see trustees committing more money into the Australian equity market.
“Conservatively, we estimate that [SMSF trustees] will be sticking [money] in on a net basis of a billion dollars a month,” Mr Tevfik said.
“I can’t see a single institutional investor that is going to come even close to those sort of inflows in equities. [SMSFs are an] army, they are the biggest acquirers of [Australian] equities,” he said.
Mr Tevfik also pointed out that SMSFs react to “changes in rules” as opposed to changes in the market when deciding when and how to invest.
“SMSFs were massive buyers of equities in 2008 and 2009. When everyone else was selling, the selfies were setting up to buy,” Mr Tevfik said.
“Why was this the case? Did they realise that equities were providing a once in a lifetime opportunity to buy?” Mr Tevfik asked. “[It was because] the concessional cap back then was three times higher than what it is now. It is as simple as that.”
“So the tax allowance was greater, and [they reacted] to the tax proposition by their broker – so that is one of the reasons why you should see more flows in SMSFs and by default [more] flows into [Australian] equities."