Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

SMSFs over-exposed to cash amid market uncertainty

Glenn Freeman  |  13 Apr 2018Text size  Decrease  Increase  |  
Email to Friend

Page 1 of 1

The double-punch of regulatory uncertainty financial market volatility sees the majority of self-managed super trustees sidelined into cash assets, a study shows.

Self-managed superannuation fund (SMSF) trustees have growing concerns on the impact of regulation and ongoing global volatility on their retirement plans, with a growing number increasing cash reserves, according to an annual survey conducted by AMP Capital.

The study of 700 investors--conducted by Investment Trends on behalf of AMP--shows 65 per cent of SMSF trustees holding cash in reserve due to global volatility concerns. On average, $110,000 in cash per SMSF is being held, that could otherwise be invested in growth assets.

Australian regulatory reforms to superannuation was another specific concerns identified by 70 per cent of those surveyed.

"With many investors increasing the amount of money held in cash as a risk-reducing strategy…trustees could be at risk of not meeting their retirement goals,” says Tim Keegan, AMP Capital.

While the number of SMSF trustees seeking professional financial advice increased 6 per cent in 2017, 63 per cent of trustees are still open to receiving further advice. One-third of respondents identified the development a retirement strategy as a key area in which they require advice, while 28 per cent nominated income generation, and 22 per cent investment selection.

“In a period of heightened regulatory change, it’s clear that many SMSF trustees are looking for help to set up the right portfolio to reduce risk while still supporting their retirement goals. It’s an opportunity for advisers to share their expertise with new and existing SMSF clients,” Keegan says.

The research also revealed some slightly worrying interpretations of diversification, a fundamental investing concept which, along with a long-term focus, is a core focus of Morningstar research.

Nearly half of trustees surveyed consider a portfolio with 20 individual equity stocks to be well diversified-- and 53 per cent say a portfolio with a mix of domestic and global equities is well diversified.

Only 35 per cent of trustees believe a portfolio invested across four different asset classes is diversified.

These findings support a commonly-cited concern about investment bias among Australian investors. While home bias is a natural response for investors, evident in every market around the globe, commentators have long suggested Australians have a greater propensity to favour a narrow range of domestically-listed sectors and companies.

“The research reveals a potential concentration risk in equities for SMSF trustees. It’s important to not only consider diversification in the equities held but also across different asset classes, including infrastructure and property for example.

“The research showed 22 per cent of trustees intend to invest in managed funds over the next 12 months, with one of the main reasons to increase portfolio diversification. There’s an opportunity for advisers to discuss appropriate unlisted managed funds and active exchange traded funds available in the market to support trustees achieve this objective," Keegan says.

More from Morningstar

• 5 funds to catch the electric wave

• Technology stocks shaken, not stirred 

Make better investment decisions with Morningstar Premium | Free 4-week trial

 

Glenn Freeman is senior editor, Morningstar Australia.

© 2018 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782 ("ASXO"). The article is current as at date of publication.

Email To Friend