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Offshore investment trend to continue

SMSF investments in overseas shares and non-residential property will occur gradually as funds consider more sensible and suitable places to hold their assets, according to an analysis of Australian Taxation Office (ATO) data.

The CoreData “Trends in SMSFs June 2014” report said SMSFs were investing more in offshore assets overall.

Growth of investments in overseas residential property grew by 3 per cent, followed by 2.2 per cent growth in non-residential property, 2.6 per cent growth in shares and 2.7 per cent in managed investments, outstripping the 2 per cent overall asset growth in the past quarter.

“Traditionally we’ve seen Australians and SMSF trustees’ love of shares and cash and that does remain – we can see from the ATO figures that more than 60 per cent of portfolios on average are invested in those two asset classes alone,” CoreData head of financial services Kristen Turnbull told selfmanagedsuper.

“However, it’s encouraging to see that we’re increasingly seeing diversification in portfolios, with growth in overseas property, shares and managed investments.

“It’s consistent with trends we’re seeing across the high net worth market as well and what’s driving SMSF trustees to look elsewhere is the consistently low cash rate and low sentiment towards the Australian economy, as is sentiment towards domestic property. They’re starting to see that overseas property is an attractive place to invest.”

Turnbull said the majority of trustees were considering overseas investments as a longer-term strategy.

“Expectations over the longer term in terms of Australian economy growth are positive, but in the short term, in the environment we’re in at the moment, they’re looking outside of that to aid growth,” she said.

“There’s still a strong bias towards the key assets of Australian shares, cash and Australian property, so I don’t think we’ll see huge swings away from that – we’ll see tinkering at the margins.”

Commenting on whether the majority of SMSFs made overseas investment decisions themselves, she said it was no longer appropriate to assume funds did not use some form of professional advice.

“It’s no longer the DIY proposition it used to be,” she said.

“A lot of these people are getting advice, whether it be from an accountant, a financial planner or broker.”

The report also found that based on newly established SMSFs, the age distribution of fund members had changed drastically in the past nine months, with 62.1 per cent aged between 34 and 54, compared to only 36.6 per cent of SMSF investors in that group in July last year.

Those aged 25 to 34 made up 11.1 per cent of all SMSF members, compared to 4 per cent a year ago. The jump translated to about 111,775 SMSFs members in that age group.

In addition, higher income earners made up a greater proportion of SMSF members, with 20.5 per cent earning between $100,000 and $200,000 in March 2014, compared to 14.4 per cent in July 2013. That represented an increase of 61,425 members.

The total number of SMSFs in Australia is now 528,701 and the number of SMSF members is 1,006,975.

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