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Jeffrey Hutton is a Morningstar contributor.

With cash piles growing and sharemarkets slumping amid wilting investor sentiment, some banks are betting self-managed super fund (SMSF) trustees will take a closer look at protected loan products that tap into dividends and capital growth while limiting exposure to any nasty turns in the market.

Westpac (WBC), which unveiled self-funding instalment products at the beginning of the year, plans to introduce its first protected equity loans since the global financial crisis before next June.

Commonwealth Bank of Australia (CBA) has said interest is growing in one of its latest offerings in the area.

"There is no question there is an overweighting to cash in SMSFs. It's just a question of where does it go?" Multiport technical services director Phil La Greca says.

Protected equity loans are a sort of non-recourse debt that offers more flexibility compared with conventional instalment warrants in exchange for higher interest rates and insurance premiums. SMSFs may like them because they give trustees exposure to certain equities without the downside risk of a slump in their underlying share price.

Potential takers will need to arm themselves with information, such as how the products are assembled and whether they getting value for money, superannuation experts say.

"People have to ask themselves, 'What's my real rate of return after the costs?'" says La Greca. "Am I getting value for money for the protection? Is that peace of mind worth it?"

Protected equity loans usually charge an upfront insurance premium that protects buyers from slumps in the value in the underlying assets. Borrowers either stump up some equity or borrow the lot.

Providers say, that for SMSFs, protected loans, which usually call for a prepaid insurance premium over a certain timeframe plus interest on the loan, make it easier to pull out of one overexposed asset class, like cash, in favour of another, like equities.

One example? Commonwealth Bank says under its package an SMSF may, for example, sell a portfolio of shares, using some of the proceeds or the prepaid premium, piling the rest into a term deposit.

In one hypothetical scenario, supplied by Commonwealth Bank, SMSF trustees sell $100,000 in shares they directly own. They pay $17,033 for the upfront premium for insurance on a protected equity loan that gives them $100,000 in exposure in BHP Billiton (BHP), Commonwealth Bank, Telstra (TLS) and Woolworths (WOW). The remaining $83,000 or so goes into a term deposit, giving the holder exposure to more assets while keeping a lid on risk.

Assuming dividend yields of about 6.3 per cent and a variable interest rate of 8.8 per cent, the after-tax income over the five-year term is only about $417, but that is before capital gains.

Protected equity loans are usually offered a prescribed set of stocks - top tier companies on the ASX 200, for example. Trouble is, some of them may be there for their dividends yields, which are funneled towards paying debt or premiums, and less so for the company's long-term capital growth outlook, says OnePath national technical director Graeme Colley.