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Report finds SMSF portfolios are diversified

SMSFs are showing they are more diversified than the industry has given them credit for, with trustees achieving diversification via several cost-effective vehicles, the latest CommSec analysis has found.

The “SMSF Trading Trends Report”, released today, said there was a significant level of diversification among SMSFs, with trustees trading exchange-traded funds (ETF) 34 per cent more than non-SMSFs.

Among CommSec clients, SMSFs accounted for more than 50 per cent of the investment in ETFs and listed investment companies (LIC) by value.

“SMSFs are often characterised as insufficiently diversified, having portfolios concentrated in cash and large-cap domestic equities, but some SMSFs are more diversified than we give them credit for,” Commonwealth Bank of Australia head of SMSF customers Marcus Evans said.

“In the current low-growth environment, it seems SMSFs have been seeking cost-effective diversification.

“Our analysis shows an increased investment by SMSFs in hybrids, interest rate securities, and Australian and international ETFs.”

In addition, the data suggested many SMSFs used ETFs and LICs to diversify into international equities as SMSFs accounted for just under 60 per cent of the Australian Securities Exchange’s clearing house electronic sub-register system holdings of international ETFs and LICs.

SMSF holdings in ETFs and LICs increased by 15 per cent and 5 per cent respectively in the first six months of 2017.

Commenting on how the trend could evolve, Evans told selfmanagedsuper: “Over the next six months, we expect to see further movement toward international-focused ETFs and LICs.

“SMSFs will continue to buy on the dips, and the desire to hold blue-chip high-yield stocks is likely to continue, despite some recent disappointment around Telstra.

“We wouldn’t expect a repeat of the significant cash inflows that came in prior to 30 June, although more of this pre-30 June cash will be deployed over the next six-month period.”

The report also revealed confident SMSFs have been taking advantage of reduced share market volatility to consolidate their portfolios, trading less often but taking larger positions during the first six months of 2017 than over the previous six months.

It found SMSFs are twice as likely to trade in share parcels of more than $25,000 as non-SMSFs, and the total value of their trades increased by 2 per cent over the six months to June 2017.

The CommSec “SMSF Trading Trends Report” is released every six months and explores the online trading behaviour of SMSF investors.

The latest report was based on a detailed analysis of active CommSec clients between July 2016 and June 2017.

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