SMSF investors have shifted their approach to international investments, showing a willingness to use and pay for good management capabilities, instead of choosing options with the lowest management fees.
OneVue head of client and product strategies Alex Wise said the firm’s exposure across the wealth management sector gave it a good insight into what type of products were either lacking or gaining appeal from both advisers and SMSF investors. “We’re starting to see a lot more demand for actively managed, lower-fee alpha strategies,” Wise told selfmanagedsuper.
“The days of the fund of hedge fund are over. We’re starting to see a lot more transparent and high-quality funds come into the market where they’re able to provide the transparency and the reporting at a low marginal fee. There’s significant demand for those types of funds.”
According to the December quarter 2014 results for OneVue’s SMSF holdings, unlisted shares dropped to 0.21 per cent, compared to the December quarter 2011 when the figure was at 1.22 per cent. Wise said in the past 12 months, a lot more volatility had crept back into local markets.
“And in volatile environments there is often a reduction in the exposures to listed equities, but what we’ve seen on the other side of that is the increase in managed fund exposure,” he said. “A lot of that [movement] really does relate to people taking capital away from the more volatile local markets and placing that internationally where using a managed fund is often a more straightforward way to access global markets.”
He said there was now a willingness to pay for expertise and access to international strategies. “There has always been a strong debate about whether you go direct, but for those international exposures and areas of significant active management the trend shows that there is a continued willingness to pay for expertise in those sectors,” he said. “You also now have a much wider range and choice in terms of international exposure.
“As we know, there are a number of highly reputable global brands that have been entering the Australian market and particularly I think the alpha sectors will continue to grow as people really look for risk-adjusted exposure in volatile environments.
”There was also an interesting theme emerging from the falling cash and term deposit flows, as well as lower exposure to listed shares, when assessed against direct property, he said.
“When you compare the cash and term deposits to direct property, there’s a clear trend there – that people are taking increased risks and looking for increased yields and capital growth in the direct property sector,” he said, adding it was consistent with what OneVue had noted in property markets during the past year.
“With the overall analysis of the housing market, in particular areas of high growth in house prices over the past two years, it’s really a question of how much of that has been underpinned by people making investments through their SMSF, and there’s a certain proportion that is.
” The direction of interest rates would influence allocations to property, he said.
“For those that believe that rates are going to rise, then you’d have to say that trend in property is not sustainable,” he said. “If you’re looking at a situation of falling rates, then property still remains an attractive asset class.”