SMSF trustees have diversified away from international and domestic equities, instead favouring property investments and opting to hold more in cash reserves, according to the SuperConcepts SMSF Investment Patterns Survey.
An analysis of SMSF investment trends across the 2016 financial year shows investments in Australian shares reduced from 37.1 to 34.5 per cent of portfolios, while international shares decreased from 14.1 to 13.1 per cent.
SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca said the continued volatile markets could be driving the more cautious approach SMSF trustees are adopting.
“Over the financial year, we’ve seen a large number of SMSF trustees diversify away from international and domestic equities. At the same time, there’s been an increasing number of investors moving into property and cash, suggesting they are looking to reduce their exposure to the stock market, which experienced periods of higher volatility during the period.
“Despite the reduction in equity investments, there remains an opportunity for SMSF trustees to further improve diversification with a large number of portfolios still heavily weighted in Australian shares, particularly the ASX top 20 stocks. The major banks were the most commonly held investments at 30 June 2016,” he said.
The move to more conservative asset classes saw cash holdings increase from 17 to 18 per cent of portfolios over the financial year, despite cash interest rates continuing to decline.
“We’ve seen trustees increase the amount of cash they have invested in short-term term deposits, climbing from 4.7 to 5.5 per cent over the year. With current interest rates on term deposits providing little returns, the move to cash could mean investors are feeling less confident in the stock market,” Mr La Greca said.
Property, both direct and listed, has continued to prove a popular investment for SMSF trustees, increasing from 18.3 per cent of investments to 21.7 per cent at the end of the financial year.
Proposed changes to superannuation has appeared to impact confidence with a significant reduction in average contributions to an SMSF, dropping 38 per cent from the June quarter in 2015 to the June quarter in 2016.
“Average contributions to SMSFs declined over the financial year, particularly in the December, March and June quarters compared to previous corresponding periods, a likely result of the uncertainty around potential superannuation changes before the May budget. Contributions declined from $17,320 in June quarter 2015 to $10,748 in June quarter 2016,” Mr La Greca said.
The SuperConcepts SMSF Investment Patterns Survey covers approximately 3,300 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 30 June 2016. The assets of the funds surveyed represent approximately $3.1 billion.
