Cash a valid SMSF asset class

Darin Tyson-Chan | 02 Sep 2011

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Darin Tyson-Chan is a journalist with InvestorDaily, a Morningstar publication.


The latest research performed on the self-managed superannuation fund (SMSF) sector has revealed cash is now being treated as a legitimate long-term asset class among the trustees of these funds.

The 2011 Vanguard/Investment Trends Self-Managed Super Funds Report has shown SMSFs held $113 billion in cash as at May 2011.

Of this total, only $39 billion was classified as excess cash, or funds that have been allocated to cash that would usually be a part of other asset classes had it not been for the recent market volatility.

"The really interesting thing is not how much excess cash is in there, but how much other cash is in there," Investment Trends principal Mark Johnston said.

"That means there is a lot more money currently sitting in things like term deposits that they now think will stay in there for the foreseeable future," he explained.

Following on from this statistic, survey participants were asked what events would encourage them to allocate this excess cash to other asset classes.

"The biggest factor is really about condition of the markets, so that's things like confidence in the stockmarket, confidence the economic recovery is real, a better economic outlook, and a sustained upturn in the market," Johnston said.

In terms of which sectors of the industry new SMSF members are being attracted, the period from 2008 to 2011 saw a larger proportion of industry fund members moving across (from 22 per cent to 29 per cent).

"This was informative for us and explained why over the last few years we've seen more industry funds taking an interest in buying research about SMSFs," Johnston said.

"From their perspective it's still a small number of people but often very high balanced members leaving, so the impact of some of those members leaving is reasonably significant," he said.

This report appeared on 2022 Morningstar Australasia Pty Limited

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