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Direct property exposure growing

SMSF allocations into direct property were consistently on the increase, with total weightings now almost making up 10 per cent of portfolios, according to the latest analysis from OneVue.

According to the March quarter 2015 results for OneVue’s SMSF portfolio holdings, direct property rose to 9.37 per cent, compared to the March quarter 2014 when the figure was at 6.09 per cent.

This shift was at the expense of cash and term deposits, with allocations sitting at 20.27 per cent in March, compared to 21.56 per cent a year ago.

“Over the past two-year period there’s been a consistent decrease in the cash rate, while the property market has been going gangbusters, so we’ve started to see that in the SMSF investment portfolios and almost a corresponding increase in property for the decrease we’ve had in cash and term deposits,” OneVue head of client and product strategies Alex Wise told selfmanagedsuper.

“For SMSFs, the liquidity requirement is really linked to when the beneficiaries of the SMSFs will be in retirement and the yield they’ll be getting from their properties over time versus the yield that they will achieve from cash.

“The hunt for yield amongst investors is a primary driver that we’ve seen in the move from less risky assets to riskier assets, such as property, and I think people are aware of that and there’s been a lot of coverage about the housing bubble, but it’s definitely a factor that people still need to be aware of.

“We’re also looking at historic lows on mortgage rates certainly over the medium to long term and that’s really just creating the environment where people have easy access to debt and coupled with that, an increase in appetite for yield.”

The findings also showed unitised trusts made up 16.57 per cent of the portfolio in the March quarter 2014, but significantly jumped to 23.09 per cent in the March quarter this year.

In March 2013, unitised trusts were at 12.22 per cent.

“Certainly looking back two years ago it’s almost doubled and the data has shown it’s been going up consistently, quarter on quarter, since the September quarter 2012,” Wise said.
“We’re seeing markets that are difficult to navigate so investors are looking to get expertise from fund managers in the management of their assets, as well as [seeking] international strategies and other strategies through unit trusts that can be difficult for investors to execute themselves.”

Separately managed accounts (SMA) experienced a drop to 22.81 per cent in March 2015, compared to 26.65 per cent a year ago, according to the OneVue summary.

“The data on SMAs have come off, but it’s largely consistent at around 25 per cent over that time and if you put SMAs and unitised trusts together, you’re now looking at almost half of portfolios in some kind of managed strategy,” Wise said, adding that he had noted improvements in support and education across the managed fund sector.

“I think managers are communicating a lot better and in fund management terms, using more immediate sources like video.

“We see a lot of education coming out on behalf of some of the managers who we work with very closely – seminars, videos, frequent updates on portfolios – and I think these are definitely a value-add to investors.

“In terms of fees, it’s a very competitive environment in managed funds and certainly over the past three to four years we’ve seen the trend towards lower fees and it’s something that’s focused on, but from our perspective we’re still seeing investors willing to pay for expertise.”

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