The SMSF Professionals’ Association of Australia (SPAA) has hit back at the critics of SMSF investing strategies, claiming this group levels negative feedback at the sector regardless of the investment techniques it employs.
“In recent days we have been told trustees are overweight in Australian equities, especially the fully franked blue chips such as the banks and Telstra,” SPAA technical and professional standards director Graeme Colley said.
“It wasn’t so long ago these same critics were pointing their fingers at SMSFs for holding too much in cash and fixed deposits. Then SMSFs investing in property gets a hiding.
“Why can’t they ever make up their minds if there is a problem with SMSFs?”
Colley expressed his concern critics of SMSFs tended to ignore the activities of the Australian Prudential Regulation Authority (APRA)-regulated funds that in some cases could potentially raise greater investing concerns.
He cited the ability of APRA-regulated fund members to make an asset allocation solely to the top ASX 300 stocks as an example.
“What’s worse, an APRA-based fund that lets you put all your money in one asset class or an SMSF that may be overweight in one asset class? I can’t speak for APRA-based funds, but in the case of SMSFs, it might just be the case that an overweight allocation best suits the fund’s risk profile,” he said.
“If SMSFs are criticised for being too exposed to market risk, then, guess what, the APRA funds that are in the same boat will fall just as heavily and their members won’t even know what’s happened as they are not engaged, unlike the SMSFs where members have high levels of engagement.”
Criticism was usually directed at SMSFs when there was a significant investment market movement that was viewed as potentially causing damage to the sector as a result of its asset allocations, he said.
“What this ignores is that the APRA figures conclusively show that SMSFs, on average, outperform their APRA-regulated cousins when markets are struggling and match their performance when markets are rising,” he said.
“They also overlook the data published earlier this year by Rice Warner that showed over the eight-year period from 2005 to 2012, the SMSF sector outperformed the rest of the superannuation industry in six of those eight years.
“It was hardly a sea of investment tranquillity – the tail-end of a boom, the GFC (global financial crisis) and slow economic recovery.
“With this armour to support the significance of SMSFs and the role they play in the superannuation industry, we now wait for the critics to fall on their swords.”
