A report produced by Vanguard and Investment Trends shows that investors are looking both to new asset classes and internationally to balance risk with return.
Investment Trends’ head of wealth management research Recep III Peker said the current state of the market has pushed investors to look elsewhere for returns.
“In previous years, we had seen increased interest in fixed income products during volatile times [but] with interest rates at all-time lows, the data suggests SMSFs are favouring assets that they see as helping them diversify their portfolio,” he said.
Accordingly, Australians’ traditional reliance on direct shares has taken a hit, with the average SMSF allocation dropping to 38 per cent since its 2013 peak of 45 per cent.
“Parallel to a drop in appetite for direct Australian shares, we recorded more interest in actively managed funds, infrastructure and REITs,” Mr Peker said.
The report found that managed funds have been gradually growing, with 45 per cent of SMSFs holding them, while they make up an average of 10 per cent of SMSF portfolios.
According to Vanguard head of market strategy, Robin Bowerman, investor concern has pushed SMSFs to find more ways to further diversify in international markets.
“This year’s research shows that many trustees are nervous about volatility generally, with increasing concern about a slowdown in China and global levels,” he said.
“What is positive from this year’s research is that SMSF investors are looking to achieve more international diversification through exchange-traded funds.
“But there is more work to be done by planners and fund managers both highlighting the benefits of international diversification and how ETFs can help investors access those markets at a lower cost.”
Of those SMSFs currently invested in ETFs, 64 per cent said that access to overseas markets is a major motivation, while over 70 per cent cite diversification.
A further 38,000 SMSFs said they intend to invest in ETFs in the next 12 months, with 40 per cent of those citing index exposure to international equities as their most attractive feature.