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SMSF trustees seize on borrowing opportunity

Rachael Micallef  |  13 Feb 2013Text size  Decrease  Increase  |  

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Rachael Micallef is a journalist with InvestorDaily, a Sterling publication.


Self-managed super fund (SMSF) investors are taking increasing advantage of limited recourse borrowing arrangements, a survey by Multiport Investments has shown.

Multiport's December SMSF Investment Patterns Survey found that SMSF trustees using the arrangement to purchase property increased to 29 per cent in the December quarter last year, from 24 per cent previously.

"Some clients have become more conscious of where their money is and the attraction of property is that it's a known asset," Multiport head of technical services Philip La Greca told InvestorDaily.

"It's a tangible asset unlike other financial products, and you can have more control over it."

The report also found the falling interest rate led to a decrease in cash holdings within the SMSF sector, from 26.6 per cent to 24.5 per cent in the December quarter.

Despite the global trend towards equity allocation, the SMSF sector only showed a slight increase in Australian shares from 35.9 per cent in the September quarter to 36.8 per cent at the close of the year.

"I think, unfortunately, the issue is really 'investor scarring' over the last few years," La Greca said.

Fixed-interest holdings increased from 10.6 per cent to 11.2 per cent in the December quarter as investors looked to lock in higher interest rates prior to the two rate cuts seen during the period.

La Greca said the popularity of property and fixed income stems from a continued fear in the Australian equities market, despite market recovery over the close of 2012.

"I think that's part of the other attraction to it - this negative sentiment about the equity market - despite the fact that the performance certainly over the last six or so months has certainly been very good," La Greca said.

"These are the drivers. So unless the sentiment changes in the equity market, fixed interest is probably the sector that is looking the least reactionary."