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SMSFs to influence future ethical offerings

SMSF investors have the capacity to inform the type of socially responsible investing offerings made available to the local marketplace going forward, according to a specialist fund manager.

Australian Ethical managing director Phil Vernon said the specialist manager has always used the approach of developing products it believed would be suitable for ethical SMSF investors, however, there was potential for SMSFs to now influence product design.

“A third of investors are effectively DIY SMSF investors, so it’s an area of the market that we can’t ignore,” Vernon told selfmanagedsuper.

“We have talked about particular products around what does a DIY ethical investor do if they’re not coming through a collective vehicle, and could we create an offering that would appeal to them.

“For us it’s really about our pipeline and capacity, and we do have things on our radar that we may want to develop in the long term.”

He revealed SMSFs made up about 10 per cent of Australian Ethical’s managed fund clients.

“We have a particular appeal because a typical SMSF investor will have a concentrated portfolio of stock-standard large caps and so to do something interesting in the fund becomes more difficult,” he noted.

“So they look for specialist managers like us as we have a managed fund that’s at the small-cap end with particular concentrations in particular areas, and gives them access to stocks that they may not be able to get directly, so it’s got a particular attraction.”

Australian Ethical head of client relationships Leah Waldie said the distribution strategy she was developing “absolutely” included SMSFs as a strong key channel for the business going forward.

“We appeal to that type of demographic, autonomy and independence that an SMSF trustee or fund wants, so I would hope that we will do more in that space in the next six to 12 months, particularly around engagement and understanding that sector,” she noted.

Waldie reiterated that among Australian Ethical’s managed fund clients, there was a reasonably strong SMSF following.

“Having said that, we also appeal to high net worth investors generally, so many of them may have a charitable trust with us or a foundation or a private ancillary fund, and an SMSF,” she said.

“So these clients are highly engaged in their investments and what they’re investing in.”

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