The latest sector research has shown SMSF trustees are continuing to move away from cash and term deposits to pursue opportunities for higher returns overseas.
The December quarter Multiport SMSF Investment Patterns Survey revealed cash holdings made up 16.5 per cent of SMSF portfolios as at December 2014, representing a 0.5 per cent drop during the quarter and down from 19.1 per cent in December 2013.
“Each quarter, we are seeing investments in cash drop to a new record low, which isn’t surprising given current interest rates,” AMP SMSF Administration head of technical services Philip La Greca said.
“Despite cash being an important strategy for those nearing retirement, we’re continuing to see trustees decide to invest in asset classes with higher returns.”
According to the study, international equities seemed to be the asset class resonating well among SMSF investors as a gateway to the higher returns they were looking for.
“In the December quarter, we saw a significant rise in the amount of people using managed funds in their portfolio to increase exposure to international markets. Managed funds now represent 19.5 per cent of total SMSF assets,” La Greca said.
“We know that SMSF trustees are interested in investing in international markets, however, many feel they don’t have the level of knowledge or experience required to invest overseas directly.
“A managed fund is a good way for trustees to access global markets without the complexity.
“Reflecting this demand, six out of the top 10 managed funds in which trustees invest are international funds.”
While international equities were proving popular among SMSF members, the survey showed domestic shares had not lost any appeal, with the major banks and Telstra still holding sway based on dollars invested, with Commonwealth Bank of Australia the most popular stock.
According to the report, the use of gearing within SMSFs had only risen marginally over the quarter, with 16 per cent of funds now having borrowed to acquire a property compared to 14.8 per cent for the previous period.
“At the end of December 2014, only 35.9 per cent of all direct property holders had a gearing arrangement in place, up from 34.4 per cent the previous quarter. The average loan amount for property purchases was $263,000, signalling the use of LRBAs (limited recourse borrowing arrangements) by SMSF trustees is stable,” La Greca said.
The survey also found contributions had increased significantly, with $13,715 being the average contribution per fund as at December 2014, up from $10,830 the previous year and $6585 recorded in December 2013.
The survey examined the investments of about 2500 funds as at 31 December 2014.
