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SMSF borrowing on the up, while cash final turns

SMSF trustees are turning away from their cash holdings and borrowing arrangements as contribution levels climb, according to new research from an AMP-owned administration firm.

In its quarterly Multiport SMSF Investment Patterns Survey for June 2014, which covers approximately 2,200 funds, Multiport found cash holdings in SMSFs reached a “record low” of 18.29 per cent, indicating this is a “less attractive option” for investors.

AMP SMSF administration head of technical services, Philip La Greca, said the “significant decrease” in cash holdings has mainly flowed into international, property and equity sectors.

“International equities have performed strongly throughout the year and we’ve seen an increase in funds in this asset class, as more investors move their investments away from underperforming asset classes, especially cash,” Mr La Greca said.

The allocation of funds to Australian equities has been lower than expected over the past three quarters due to the performance of Australia’s top 20 stocks, Multiport stated.

“Australian shares are still very popular with SMSF trustees, with close to 40 per cent of all funds allocated to this asset class. However, over the past three quarters we’ve seen slight decreases in the amount of funds invested in Australian shares. This is largely due to the higher weighting in the top 20 local stocks, which have under-performed the All Ordinaries in the 2014 financial year,” said Mr La Greca

Multiport also found that while property remains a popular investment option for SMSF trustees, the number of funds utilising a borrowing arrangement has declined to 15.6 per cent, compared with 16.8 per cent in the past quarter.

The average property loan for the quarter was $272,000, Multiport also found.

Contribution levels have also been climbing, Multiport said, with the average contribution inflow per fund for the June 2014 quarter increasing 27 per cent to $13,750.

“Generally we see contribution levels climb in the last quarter of the financial year as members add to their fund in line with contribution caps. However, the increase in contributions for the 2014 financial year is the biggest we’ve seen since the higher cap for those over 50 ended in 2012,” said Mr La Greca.

“This increase is most likely the result of the increase in the concessional cap for members over age 59 to $35,000 compared to a cap of $25,000 applying to all ages for the previous financial year. The increase in the super guarantee from 9.25 to 9.5 per cent would have also increased contribution levels,” he said.

SMSF borrowing on the up, while cash final turns
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