SMSF trustees continue to hold overweight positions in cash due to a lack of knowledge or guidance in relation to other asset classes.
Zenith Investment Partners national sales manager John Nicoll said the majority of trustees did not know where to safely invest in the current environment.
“My general observation is that a lot of SMSF investors’ money is in cash because they don’t quite know where to place it in the current market [environment],” Nicoll told selfmanagedsuper.
“But they’re certainly going to have to start moving as interest rates continue to drop, as the value they’re getting from their cash component is certainly diminishing, and if they’re looking at having their money in there over the long term, it’s going to be a big negative.
“SMSF investors are primarily invested in cash and residential property; to a lesser extent in Australian shares and then an ever lesser extent in managed funds.”
He said there needed to be more education around asset allocation for SMSF trustees, in order for them to become familiar and comfortable with different asset classes, particularly those that were providing better returns than cash.
“There are quite a number that are being advised by financial planners and I think they’re generally doing a very good job in terms of asset allocation,” he said.
“It’s a bigger question around those who are doing it entirely on their own or potentially through the accounting fraternity.
“There’s a very limited knowledge on true asset allocation and it would really be of great benefit to at least look at how to potentially further diversify into other asset classes – they could currently be on some great growth that’s been found in international equities, for example.”
He said sentiment among SMSF trustees had undoubtedly improved, but there was still a strong sense of caution.
In addition, another worrying factor that had emerged in the SMSF trustee space was in relation to investment horizons, he said.
“Right across the SMSF marketplace, a short-term view seems to be more and more predominant,” he said.
“There seems to be less focus on a medium-to-long-term investment time frame these days and that’s also going to impact quite a lot of people.”
Zenith was looking to provide more asset allocation material to SMSF investors through the adviser channel, he said.
