The latest industry research performed by the University of Adelaide’s International Centre for Financial Services and SMSF administrator SuperConcepts has revealed group and gender are significant factors in determining the investment philosophy of an SMSF.
The report, “Gender and group bias in SMSF allocation”, showed SMSFs with a larger number of members opted for more conservative investments and female members were more risk averse than their male peers who opted for larger allocations to asset classes such as domestic shares and property.
“While SMSF funds with more male members tend to invest in more risky assets, our findings also show that funds with a greater number of members tend to prefer safe allocations by investing more in cash,” SuperConcepts general manager of technical services and education Peter Burgess said in analysing the findings.
“Taken together, these results suggest that gender and group behaviour bias work in opposite directions.
“Lower investments in cash attributed to gender bias get cancelled by group behaviour bias, with the net effect resulting in a reduction in cash holdings over time.”
Burgess suggested SMSFs containing more members tended to be funds set up by families and so had an influence in implementing more conservative investment strategies with the aim of preserving family wealth.
Also commenting on the report, University of Adelaide professor Ralf-Yves Zurbrugg suggested other academic studies had shown individuals have a tendency to behave differently in a group mainly due to a desire for social acceptance.
According to Burgess, gaining an understanding of the effect of group and gender bias in making SMSF investment decisions was vital for better long-term results.
“This research is important as awareness leads to action. If trustees are aware of their biases, they can try to overcome them,” he said.
“This will go a long way towards making sure any investment decisions they make are in their best interests and will meet retirement and other long-term financial goals.”
Further, the report revealed cash holdings in SMSF portfolios had declined from 23 per cent in July 2008 to 15 per cent in July 2015, while allocations to property and equities had remained relatively stable.
The research was based on a sample size of 20,121 SMSFs and used longitudinal data compiled between 2008 and 2015.