SMSF trustees have diversified away from Australian and international equities and towards property and cash, according to new research.
The SuperConcepts SMSF Investment Patterns Survey June 2016 indicates that SMSFs reduced investments in Australian shares from 37.1% to 34.5% of their portfolios during the 2016 financial year. Investments in international shares decreased from 14.1% to 13.1%.
SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca, said that volatile markets could be driving a more cautious approach by SMSFs.
“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,” he said.
“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.”
SMSFs appear to be favouring property and cash instead of equities. The research found that SMSFs increased investments in property from 18.3% of portfolios to 21.7%. Holdings of cash increased from 17% to 18% of portfolios over the 2016 financial year.
“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,” said Mr La Greca.