Fractional property investing could provide the solution for SMSF trustees looking to invest in the asset class if the government acted upon the Financial System Inquiry’s recommendation to ban limited recourse borrowing arrangements (LRBA), according to the head of a funds management house.
“The problem most SMSFs face is being able to purchase property as part of an asset allocation strategy,” DomaCom chief executive Arthur Naoumidis said.
“Property is an all-or-nothing proposition that for most trustees necessitates borrowing because of the relatively low value of their fund and the relatively high cost of property.
“In most cases buying a whole property overweights the portfolio and the loan increases the risk disproportionately to the benefit.”
Naoumidis said allocations to DomaCom’s fractional property investing offering could also shield SMSF trustees from property spruikers as access to the investment vehicle could only be gained through a financial adviser.
Furthermore, the fractional element of the investment would help alleviate concerns regarding large portfolio allocations to single illiquid assets, he said.
This was another issue raised by the Murray panel.