SMSF investment underperformance is costing each fund around $13,000 over the past year, according to SuperGuard 360.
SuperGuard 360 compares the performance of SMSFs, based on reporting asset holdings, to the investment strategies of MySuper super funds. It found that returns, before fees and taxes, for SMSFs were 6.6% at the end of April 2018. If SMSFs had invested as MySuper products it is estimated they would have returned 7.8%.
This 1.2% less in investment returns is estimated to cost $8 billion across the sector, or $13,000 per SMSF.
SuperGuard 360 ascribes this lower performance in part to a lower allocation to growth assets, in particular internaitonal shares.
Additionally “the average SMSF member is highly likely to have experienced even weaker returns”, as around three-quarters of SMSFs have under $1 million in assets and these “smaller SMSFs generally underperform larger ones due their different asset allocation,” said SuperGuard 360.
“As we approach the end of the financial year, SMSF trustees should take the opportunity to benchmark their investment portfolio, their returns, the fees they are paying, the financial advice they are receiving and especially review their fund’s service providers.”
SuperGuard 360 calculates two indices to compare the return an SMSF would receive if investing as per the SMSF asset allocations in ATO statistics – the SG360 SMSF reference index – and the returns an SMSF would receive if they invested the same as the typical APRA-regulated MySuper product – the SG360 default index.
The default index records higher returns across 1, 3, 5 and 10 years. Though the reference index has closed the gap somewhat from March, when the gap was 2.0% (5.4% v 7.4), to the 1.2% for April. The 10 year figures remain at 5.3% for the reference index and 5.7% for the default index.
SuperGuard 360 provides services to SMSFs, and is owned by Rainmaker Information.