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ACBC launches SMSF fixed income book

Australian Corporate Bond Company (ACBC) has launched an e-book to assist SMSF trustees manage the defensive portion of their portfolios more efficiently.

The publication, “How to have the best of both worlds in your SMSF – Income and security”, addresses broad investment themes, but predominantly focuses on the allocation SMSFs make to cash and term deposits.

It questions the notion that SMSF trustees hold that “cash is king”, particularly with such low interest rates currently pervading the market, suggesting these individuals should look beyond cash and term deposits to consider bonds to increase returns without increasing risk.

“Given their low-risk profile and certainty of income, it’s surprising that SMSF investors are not utilising bonds more extensively in their portfolios,” ACBC chief executive Richard Murphy said in the book.

“Corporate bonds typically offer higher interest rates than cash and term deposits. This suggests SMSFs may be able to improve their performance by reducing their cash balance and reallocating the proceeds into bonds.”

The title also informs trustees that access to a variety of bonds has held back SMSFs’ exposure to this asset class in the past, but this situation has changed with the introduction of exchange-traded bond units.

The e-book can also act as a guide as to how SMSF trustees can invest like professionals, detailing institutional portfolios’ asset allocation in comparison to typical SMSF investment selections.

In doing so it makes a stronger case for bond allocations within SMSFs, highlighting the fact institutional investors typically have large bond holdings and smaller cash holdings in the defensive portion of their portfolios.

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