Self-managed superannuation funds have rapidly grown in popularity as they offer a highly customised solution to retirement saving. There is now more than $500 billion invested in Australian SMSFs.
Asset allocation among SMSFs differs greatly, on average, to that of publicly offerred funds. They typically hold higher allocations cash, Australian equities and direct property but lower exposures to international equities.
Statistics on the asset allocation of SMSFs can vary considerably and the source that I use is the Multiport figures as they are the most up to date. The numbers in the table below suggest that around 9% of SMSF assets are invested in international shares. Australian Taxation Office data suggests this figure is around 2% to 3%. Over 20% is held in cash and short term deposits.
| Sector | 30 June 2013 (%) |
| Cash and short term deposits | 22 |
| Fixed Interest | 12 |
| Australian Shares | 38 |
| International Shares | 9 |
| Property | 18 |
| Other (Hedge funds, agricultural funds, and private geared and ungeared trusts) | 1 |
| Total | 100.0 |
Source: Multiport Pty Ltd
So if we average the Multiport and ATO figures then somewhere around 6% of SMSF money is in international shares. Compare that to the Future Fund which has over 40% invested internationally.
The best performing asset class of the last 12 months has been international shares and some unhedged managed funds, managed accounts and exchange traded funds have produced between 30% to 40%.
So why do SMSFs have such low exposure?
SMSFs have lower exposure mainly due to the lack of knowledge on the part of trustees about the markets and products and services available. There is also the perceived difficulty in gaining direct access.
It’s easy to buy Australian shares, very easy to set up an online broking account and that’s what most SMSFs have. SMSFs also tend to have very concentrated Australian share portfolios being very heavily weighted to the top four banks, BHP,Rio and Telstra. As such their returns are really riding on the coat tails of the top 20 stocks.
But to buy international shares is a bit more complex because it’s a question of which country do I buy in? What stock do I buy in that country, or what are the other options?
Gaining international exposure is however now quite easy. There are really 4 options:
• Open an international broking account (but a very good idea is to get advice first on stocks to buy)
• Use a managed account – this is a portfolio of stocks bought and managed for you but held in your name
• Use a managed fund – there are a small number of well performed funds managed in Australia
• Use an exchange traded fund (ETF) – there is a reasonable range of funds available if you would rather try to track index performance.
So now might be the right time to review where you are invested.
