SMSF investors’ appetite for international exchange-traded funds (ETF) has picked up in recent months, according to State Street Global Advisors (SSgA).
The investment manager’s registry data showed that of those investors buying an international ETF, about 60 per cent were SMSF investors, SSgA Australia head of SPDR ETFs Amanda Skelly said.
“The majority of people buying international ETFs are doing it within their SMSF,” Skelly told selfmanagedsuper.
“We’ve heard a lot of people talking about it and recently we definitely have seen more interest from SMSF investors in the international [space].
“Generally SMSFs don’t hold a lot of international equity in their portfolio, but they’re looking for easy ways to do that and they’re finding that ETFs are a simple way to access international exposure.”
However, the challenge for the ETF industry was to educate SMSFs on how to combine their preferred single domestic equity allocations with a more diversified foundation to ensure they minimised any risks of one-time events, she said.
“They will always hold Australian shares directly and that’s a smart choice for many because there are some strong reasons for doing that – tax benefits and familiarity,” she said.
“But there’s a lot of education [needed] on the role of international exposure in a SMSF portfolio, so I still think we have a long way to go.
“That’s part of the education process for the ETF industry – to show ETFs that they can have the best of both worlds through keeping their direct stocks, but potentially allocating a small part to a core investment to get that diversification.”
SSgA’s registry also revealed that of those SMSFs that held ETFs, 50 per cent were holding broad-based ETFs, with one in four holding the SPDR S&P/ASX 200 Fund as their foundation.
“As we started to scratch the surface on those SMSFs that have started using ETFs, we found there was more interest in ETFs as a core to their portfolio than what we initially thought,” Skelly said.
“We looked at Investment Trends research as well as some of our own data on our registry and found that most SMSFs will hold a broad-based Australian equity ETF as a foundation and then they might hold a little bit of the sectors as satellites around the core, so they’ve certainly been taking that core/satellite approach.”
When it came to the number of clients using ETFs who were advised versus non-advised, she said the proportion was changing.
“We have a rough idea from what we can see from the investors that we have and the majority have traditionally been going direct,” she said.
“Whether they’ve been seeing an adviser to get some thoughts is another question and we hear anecdotally that a lot of SMSF investors run an idea by their adviser, but they may [take action] themselves.
“In the last year though, we’ve seen a lot more come through advisers and the way we can see that is we’ve seen a lot more people come via a platform – with platforms becoming a lot more cost effective, SMSFs and their advisers have found a way to make that work from a cost/benefit perspective.”
The most compelling factor for ETF usage was instant diversification with one trade, she said.
“If we look at past Investment Trends research, the top reasons people use it is for diversification and low cost,” she said.
“After that, it’s simple access, particularly for international markets.”
