The latest sector research has shown trustees are gradually moving away from the S&P top 10 shares in search of capital growth and greater yield.
The SuperConcepts “SMSF Investment Patterns Survey” revealed that during the March quarter 2016, investments in the Australian Securities Exchange’s (ASX) top 10 shares by market capitalisation were significantly reduced from 20 per cent of fund assets invested in 2015 to 14 per cent at 31 March 2016.
According to SuperConcepts technical and strategic solutions executive manager Phil La Greca, the continued volatile markets were driving trustees to search for investments that drove better returns.
“We’ve seen a significant amount of SMSF trustees diversify away from Australia’s largest stocks, however, rather than investing in different asset classes, we’re seeing a trend where trustees are investing in mid and small caps on the ASX,” La Greca explained.
“It has been an effective strategy, with the strong performance of smaller companies on the ASX helping to drive better returns than the index for SMSF trustees.”
The trend to invest in other stocks on the ASX had resulted in the overall allocation to Australian shares increasing marginally from 35.4 per cent to 35.8 per cent over the quarter, the survey found.
“While many trustees have benefited from this approach, there still remains an opportunity to further improve diversification with SMSF trustees continuing to be heavily weighted in domestic equities,” La Greca said.
Also during the March quarter, investments in international equities decreased slightly from 12.9 per cent to 12.6 per cent, while funds invested in fixed interest remained steady at 12.3 per cent.
Investments in cash increased 0.4 percentage points during the quarter, now representing 18.4 per cent of all assets held.
La Greca said over the past two years the amount invested in cash had continued to increase, with many trustees deciding not to renew term deposits in the current low interest rate environment.
Contribution levels to SMSFs during the March quarter were at the lowest level in two years, with the average contribution inflow per fund at $5426, down from $6393 the previous quarter.
“While we typically see a decline in SMSF contributions during the March quarter, this year has been particularly low,” La Greca said.
“This could be a result of concern about speculation on proposed superannuation changes, which was top of mind for many trustees during the quarter.”
The survey covers about 2900 funds, a sample of SMSFs administered by Multiport and the investments held at 31 March 2016.
The assets of the funds surveyed represent around $3.1 billion.