SMSFs move outside ASX top 20: report

SMSFs are progressively looking beyond the largest 20 companies listed on the Australian Securities Exchange (ASX) to maximise the growth of their investments, the latest industry report has found.

The CommSec “SMSF Trading Trends Report” found SMSFs are tapping into global economic trends, such as Chinese demand for Australian milk products, the growing need for lithium and rare earths by battery manufacturers and the recent recovery in oil prices.

“SMSFs are leaders in investment trends and are a good barometer on where the next wave of investments from the broader market will go,” Commonwealth Bank of Australia head of SMSF customers Marcus Evans said today.

“Lower returns from traditional SMSF-favoured stocks with household names such as Telstra have led to SMSFs investing more capital outside the ASX 20, suggesting they are willing to take on more risk to get higher returns.”

The widely publicised gains from mid-cap and junior stocks, and the ongoing strength of many international markets – especially in the United States, Europe and emerging markets – has led SMSF investors to conclude there may be better opportunities elsewhere, the report said.

“There are also signs that SMSFs have made the move outside of the ASX 20 with some conviction,” Evans added.

“This is illustrated by the fact that while the average SMSF trade size has decreased over the period, the trade size of those stocks outside the ASX 20 has, in fact, increased.”

In contrast, a previous CommSec report found SMSFs were the largest net investors in the ASX top 20 in 2016, trading 30 per cent more than non-SMSFs, yet there were signs of trustees taking a more conservative stance in response to the 2016 federal budget super reforms.

When it came to exchange-traded funds (ETF), this year’s report found SMSFs are using ETFs to gain exposure to international markets and sectors that may otherwise be difficult to access.

However, in the six months to 31 December 2017, SMSF appetite for ETFs seems to have peaked.

While their overall holdings of ETFs have continued to rise, the value of ETFs traded by SMSFs has decreased by 6 per cent, the report said.

This fall has been primarily in domestic equity funds, while international funds have continued to increase albeit at a slower pace than previously experienced.

SMSFs again bucked the trend and were showing increasing interest in investing directly in international shares, with household names such as Apple and Amazon among their top 10 favourites.

“We will continue to watch the investment habits of SMSFs closely,” Evans said.

“To date, they have been setting the trends when it comes to retail investment.”

The report is based on a detailed analysis of active CommSec clients between 1 July 2017 and 31 December 2017.

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