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Jeffrey Hutton is a Morningstar contributor.

Limited recourse lending is gaining popularity among self-managed superannuation funds (SMSFs) as more of the financial products come onto the market and trustees get familiar with their detail, a new survey from Multiport shows.

At the end of the June quarter, about 14 per cent of funds were snapping up warrants and protected loans that let borrowers use debt to buy assets but limit how much they can lose, says Mulitport, an administrative services provider for SMSFs.

That compares with about 13 per cent at the end of the March quarter, Multiport says, which recently started the survey. What's more, the survey showed a small 4 per cent swing in the use of lending towards buying financial assets rather than property.

The growing use of limited recourse lending on behalf of SMSFs underscores improved legal clarity around how the loans can be used and what banks can claim if loans go bad. As familiarity improves demand for the loans will grow, market watchers say.

"We're seeing more comfort in the lending space," says Craig Morgan, managing director of SMSF Loans.

"We are getting more inquiries and the demand is being driven by clients."

While the federal government allowed SMSFs to use some forms of lending to buy assets for their retirement funds, many trustees held back.

Changes introduced in July 2010 included allowing borrowers to refinance loans with other banks, limits on renovations of properties held by superannuation funds and the allowance of personal guarantees that individuals can offer to make up for losses to lenders if investment properties are repossessed and sold for less than the loan amount.

The findings suggest that for some SMSF trustees, recent slumps in equity markets are an opportunity to increase holdings of equities, helping stem a growing reliance on cash and property.

As trustees grow more familiar with the range of products on offer, limited recourse lending will gain in popularity, Multiport says.

"There used to be uncertainty surrounding these products," says Multiport chief executive John McIlroy.

"We expect the proportion of SMSFs using non-recourse lending to grow beyond 14 per cent."

Limited recourse lending to SMSFs kicked off in 2007 but the onset of the global financial crisis a year later overshadowed the changes, prompting most trustees and investors to hold assets as cash.

Property and term deposits are still popular as overseas debt and economic woes add to uncertainty. Cash holdings in the $420 billion SMSF sector rose to 22.8 per cent in June 2011, that's up one percentage point since the previous quarter and is at its highest level for 18 months.

Property investments accounted for 52 per cent of non-recourse lending, while financial assets made up 48 per cent, the survey showed.