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Move to global slower than expected

The latest sector report has found SMSF trustee allocations to overseas investments in the past 12 months did not meet expectations, but they should improve in the future with the growing global expertise emerging in the industry.

According to the second annual Financial Services Council (FSC) and UBS Asset Management “SMSF Report December 2015”, when it came to the investment mix, 23 per cent of SMSFs had exposure to overseas equities this year, compared to 26 per cent last year.

Deposits/cash remained the highest percentage allocation in SMSF portfolios at 67 per cent, followed by managed funds at 49 per cent and domestic equities at 46 per cent.

The average allocation to overseas equities was 5 per cent, compared to 24 per cent for deposits/cash, 25 per cent for managed funds and 19 per cent for domestic equities.

The report also found 19 per cent of respondents said they were considering diversifying their SMSF portfolio into international shares, with the strongest demographic being those aged 18 to 44 at 38 per cent compared to the more risk-averse older groups.

Commenting on what overseas regions were appealing to SMSF trustees, UBS Asset Management head of Australia and New Zealand Bryce Doherty said it was much broader than just concentrated interest in the United States.

“It’s world ex-Australia,” Doherty said at a media briefing for the launch of the report on Thursday last week.

“It’s actually just that first step of getting money to be invested in markets outside Australia.

“Australians, like every country, have a bias towards their home and dating back to the demutualisation of National Mutual and with CBA and Telstra being listed, I think we’ve got a generation of Australians who are very comfortable and used to buying equities, so that bias comes through, which you can see in the asset allocation.

“That hasn’t been a terrible place to be by any stretch, but it is important that diversification does help give you shock absorbers within your overall investment.”

FSC chief executive Sally Loane added: “We’re also getting growth in the expertise in our asset manager sector of people who know global equities, so that’s a really interesting, developing growth niche area as well.”

Doherty said the evolving expertise should result in an increase in the international allocations percentage in next year’s report.

“I’d expect it to be greater,” he said.

“I’ve got to say I was a little surprised that it didn’t grow that much in this year’s survey.

“Particularly with the Australian dollar and coming back to a more usual level, people who are invested offshore got fantastic gains just by being offshore either in US dollars or Swiss francs or euros.”

Loane said last month’s release of the FSC/Perpetual “Australian Investment Managers Cross-Border Flows Report” for 2015 supported the growing development of offshore investment skills.

“Interestingly, we found that people and institutions who were investing with Australian asset managers were using them not only to invest in Australian equities and Australian investment vehicles, but also they were using those Australian managers for their global equity investments,” she said.

“So it’s an expertise that has grown up here and it’s growing larger and larger.

“It’s been recognised by international investors and hopefully increasingly by Australian investors.”

The research was conducted by KREAB Research and was based on a survey of 601 SMSF holders between October and November.

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