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SMSFs value ETFs for overseas access

SMSFs holding exchange-traded funds (ETF) were more likely to favour ETFs for access to overseas markets than ETF users, according to a joint report by BetaShares and Investment Trends.

The “2015 Exchange-Traded Funds Report” revealed 64 per cent of SMSFs that used ETFs indicated the reason for using that type of investment vehicle was for access to overseas markets, whereas fewer than 60 per cent of all current ETF users selected that reason.

In addition, 35 per cent of SMSFs selected liquidity and ease of buying and selling, but less than 30 per cent of all ETF users selected that reason.

“There is a really big chunk of SMSFs that say the reason they use and invest in ETFs is to gain overseas exposure plus they are more likely than the general ETF investor to recognise the liquidity benefits of ETFs,” Investment Trends head of wealth management research Recep Peker said.

“Unlike going into managed funds where it might take longer to get out of the market, SMSFs recognise that ETFs are easier to get in and out of.

“These are the two benefits that SMSF investors say they see from using ETFs [in contrast to ETF investors overall].

“Up until 2012, there wasn’t much interest in getting overseas exposures from Australian investors in general, but SMSFs tended to be the early adopters who went into international investments at the start of 2012, with the rest of the market following at the back end of 2012.”

Diversification was shown to be the top reason for ETF usage by both SMSF and overall ETF investors, 71 per cent and 70 per cent, respectively.

BetaShares managing director Alex Vynokur said from an exchange-traded product issuer perspective, investors were much more granular with their international exposures.

“Relatively few would go for a broad world ex-Australia type of investment,” Vynokur said.

“People tend to be very hands-on with their investments, particularly SMSFs, so they will look at things like currency, for example, where investors will go overweight in the United States market.

“Sometimes we see tilts into Europe or into Japan, so there is actually a fair bit more granularities.”

In addition, he revealed another trend with SMSFs and ETF usage was the desire to access sectors and industries that were not typically available in the Australian market.

“This includes things like the NASDAQ, technology, healthcare, et cetera,” he said.

“People are specifically looking to complete portfolios where they just don’t have access to that.”

The report said the number of SMSFs holding ETFs had grown in line with the increase in the number of ETF users, with 83,000, 41 per cent, of the estimated 202,000 ETF investors holding ETFs through their SMSFs.

The report was based on a survey of 9418 respondents conducted between August and October last year.

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