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SMSF managed fund appetite stable but strong

The current and intended use of managed funds among SMSFs has stabilised after experiencing an increase over the preceding few years, the latest industry research has found.

The “2017 Vanguard/Investment Trends Self-Managed Super Fund Reports” revealed that in 2007, just over half of SMSFs, 56 per cent, used managed funds.

However, this figure fell to 42 per cent in 2011, 36 per cent in 2012, 35 per cent in 2013 and 37 per cent in 2014.

In 2015, the figure jumped to 43 per cent of SMSFs using managed funds.

In 2016 and 2017, the number increased to 45 per cent.

“We went through an interesting period where SMSFs used to hold managed funds,” Investment Trends head of wealth management research Recep Peker said at the launch of the research.

“They fell out of favour between 2011 and 2014, but since then the use and adoption of managed funds has been increasing, and this has been driven by SMSFs recognising that the professional managers that they sold out of in the past had actually performed fairly well.

“And instead of picking stocks themselves, had they stayed in an active fund or index fund, perhaps depending on what it was, they could have had a better outcome, especially if they had used it for an international exposure.”

Peker added only a very small portion of total SMSF assets, less than 5 per cent, had exposure to overseas assets.

“Those SMSF trustees who moved out of managed funds lost a large chunk of their overseas exposure, so this buyback into managed funds links with accessing international assets, strategies that they can’t otherwise replicate themselves, and also the growing appetite for indexing,” he noted.

The research found 20 per cent of SMSFs intended to invest in managed funds, the same figure as last year, and the percentage of SMSF assets in managed funds also remained steady at 10 per cent this year compared to 2016.

“Although this appears to look steady, the dollars that SMSFs are contributing to the Australian managed fund industry is increasing significantly because of the growth of the total pool of SMSF assets,” Peker noted.

In terms of the types of managed funds SMSF trustees intended to prioritise, the report found actively managed international equities were the top choice, followed by actively managed Australian equities.

“But if we look at what type of managed funds have grown in trustee interest [from last year], we have both international and Australian equities indexes jumping significantly,” Peker said.

“And we also put exchange-traded funds (ETF) on this list because some investors seem to view them the same as managed funds, and the interest to use ETFs has also grown quite significantly from last year.

“So there has been a resurgence in the appetite to use index products among SMSF trustees.”

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