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ETFs, Investments

SMSFs only gaining access to small pool of ETFs

SMSF investors can only get their hands on about 10 per cent of the exchange-traded funds (ETF) available globally, with large gaps in sector and thematic exposures, according to ETF Securities.

ETF Securities co-head of sales Kanish Chugh told a media briefing in Sydney today while there are hundreds of ETF products available in Australia, with firms including BetaShares, Vanguard, iShares and State Street covering the sector’s top 50 European equities and the like, large gaps remain.

“I think it’s going to be more the sector exposures, thematic exposures that we start to see opening up,” Chugh said.

“In terms of SMSF clients, it’s going to be on the fixed income side, on the international equities side, filling out the gaps in the ETF market because there’s still more products to launch, but it will be away from the low-cost broad market exposure because they’re pretty much done and dusted.

“There is an exposure type for every broad market exposure at the moment.”

He identified gaps in global sectors, observing the consumer discretionary, telecommunications and utilities sectors remain unavailable in Australia.

“In terms of global real estate there is one ETF available from State Street in Australia,” he said.

Head of ETF Securities Australia Kris Walesby said as SMSF investors’ understanding of ETFs has surged, they have become increasingly focused on domestic ETFs.

“[Investors may have], say, a portfolio of 10 stocks where there’s constant vagaries going on and SMSF clients are notoriously bad at adjusting their portfolio for circumstances. They just leave the same stock in their portfolio ad infinitum, never selling it, never doing anything,” Walesby said.

With an ETF portfolio that focuses on the Australian market, there can be 30 stocks within that ETF at a minimum, with intermediaries constantly rebalancing the portfolio for SMSF investors, he noted.

In terms of financial advisers’ understanding of ETFs, Chugh said many are aware of what an ETF is, however, they may lack understanding of where they fit in a portfolio.

“But that’s the next level of conversation that we’re having with management advisers,” he said.

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