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SMSFs increasing equities market influence

SMSFs are now one of the most significant savings vehicles in the country and are starting to have a telling impact on the Australian equities market, according to a senior analyst with an internationally-owned fund manager.

“These self-managed super funds are increasingly a very influential part of the Australian equity market,” Tyndall AM portfolio manager and senior analyst Jason Kim said.

“They now account for 16 per cent of all equities invested in Australia, that is, they account for $220 billion.

“And that’s going to rise. The flows are continuing.”

Kim said SMSF members were still favouring investments in dividend-yielding stocks and that demand, along with the continuing shift of the baby boomers into retirement pursuing similar strategies, would result in dividend yield plays remaining strong and producing solid results in the coming years.

“For the next two to three decades we expect dividend yield strategies to continue to outperform because of this continuous demand of high-yielding equities,” he said.

He warned SMSFs portfolios were still too heavily concentrated in a few stocks and a more active approach to those portfolios would allow members to better navigate any ongoing market fluctuations.

“It’s not a very sound strategy to buy the big four banks plus Telstra and there will be pockets of overvaluation when you have continuous demand, regardless of value,” he said.

“As a result we do believe that an active strategy is the best way to navigate through these challenges.

“While we do expect dividend yield strategies to outperform for the next two to three decades, there will be cycles within that, and there will be periods where dividend yields may underperform at times and therefore an active approach can navigate through this better.”

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