SMSFs with more members tend to be more risk averse, according to new research.
SMSFs with more members tend to invest more heavily in cash, and less in equities, according to the Gender and group bias in SMSF allocation report by SuperConcepts and the University of Adelaide’s International Centre for Financial Services.
The research also suggests that male SMSF members prefer riskier assets, holding more of their super balances in shares and property, compared to women.
SuperConcepts General Manager of Technical Services and Education Peter Burgess said the research highlights two behavioral factors that have a significant influence on how SMSFs allocate assets – gender bias and group behavior.
“This research is important as awareness leads to action. If trustees are aware of their biases they can try to overcome them. This will go a long way towards making sure any investment decisions they make are in their best interests and will meet retirement and other long-term financial goals,” he said.
“While SMSF funds with more male members tend to invest in more risky assets, our findings also show that funds with a greater number of members tends to prefer safe allocations by investing more in cash.”
“Taken together, these results suggest that gender and group behaviour bias work in opposite directions. Lower investments in cash attributed to gender bias get cancelled by group behaviour bias, with the net effect resulting in a reduction in cash holdings over time.”
“SMSFs with more members tend to be families and this adds a different dimension. Trustees may be concerned with protecting family wealth and there is often a need to adopt a more conservative approach with decisions when there are multiple people with different priorities involved.”
The report is based on longitudinal data of 20,121 SMSFs between 2008 and 2015.