Some investors will gain their first experience of Exchange Traded Funds (ETFs) through the direct investment options now offered by a number of large commercial and industry super funds.
This may encourage some super fund members to eventually go a step further and establish their own self-managed super fund, perhaps with ETFs as the core investment. Others may find that the direct investment options satisfy their desire for more control over their super investments and decide against setting-up an SMSF.
The offering of ETFs as part of the direct investment options of some large super funds is another step increasing both the popularity and investor knowledge of the products.
Recent ASX research (PDF) shows that the market capitalisation of Australian-listed exchange traded products – comprising Exchange Traded Funds and Exchange Traded Commodities – grew by more than 62 per cent to $18.8 billion over the 12 months to the end of May.
And the market capitalisation of locally-listed exchange traded products increased by 143 per cent or by more than $11 billion over the past two years. (The vast majority of exchange traded products are index-tracking ETFs.)
Typically, direct investment options give members the ability to choose individual stocks from the S&P/ASX 200 or 300, ETFs covering various asset classes (covering Australian and overseas markets) and a restricted number of term deposits. Some direct investment options include listed investment companies among their available investments.
Some large super funds are offering their direct investment options to members in both the accumulation and pension phases.
No doubt, direct investment options will not provide some members with the degree of investment freedom and flexibility they are seeking.
For instance, there are limits with direct investment options on the percentage of a member’s super savings that can be invested in each one. Also, some members may want to make their selections from a wider choice of investments than on offer.
Such members may decide to setup a SMSF, perhaps once their superannuation savings are sufficient to warrant their own super funds.
Yet as a superannuation adage goes, SMSFs are not for everyone. And, in the same sense, direct investment options of large super funds are not for everyone.
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Robin Bowerman is Head of Market Strategy and Communication, Vanguard Australia. As a renowned market commentator and editor Robin has spent more than two decades writing about all things investment. |
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