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Income, volatility still among pain points

Annual investor research performed by AMP has identified generating income and managing the volatility of equity markets as two significant concerns for SMSF trustees.

The findings come from the financial institution’s “Black Sky Report 2017” and in regard to the search for more yield, AMP Capital head of SMSF and self-directed wealth Tim Keegan said it was understandable as 40 per cent of assets in the sector were in pension phase.

“What do people in pension phase want: irrespective of the size of their balance, they’re seeking greater income,” Keegan said.

“The reason why it’s a worry obviously is that we’ve got the lowest cash rate in living history.”

In response to this trend, he said AMP had noticed significant flows into its real assets, such as real estate and infrastructure, as SMSF investors looked for new investments that could deliver them better yield at lower levels of risk than equities.

The report identified equity market volatility as the second factor causing SMSF trustee angst.

“Equity markets, whilst reaching some new highs, I think the general levels of volatility in equities and the ongoing news and noise around global markets is disturbing SMSFs and in fact they say it’s their number one worry,” Keegan said.

He added AMP was seeing an increasing SMSF appetite for infrastructure investment as a method to combat market volatility.

“[Investing in infrastructure means] you’re getting equity-like returns, or potentially greater than equity returns, at less than half the volatility,” he noted.

AMP’s research found investment portfolio diversification to be the third area of worry for SMSF trustees.

Keegan said while more than half the SMSF trustees surveyed for the report admitted they wanted a more diversified portfolio, ATO statistics and SuperConcepts data showed this was not being achieved.

Of the AMP Capital SMSF clients, one-third had more than 50 per cent of their portfolios in Australian shares with a high concentration in banking, mining and telecommunications stocks.

“That’s where I think we are seeing, and certainly the last three years’ results suggest, an increasing appetite for managed funds, and where we’re particularly seeing that play out is in exchange-traded funds,” Keegan noted.

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