During the first half of the year, SMSFs increased their international share trades by 30 per cent, demonstrating their continued appetite to expand offshore investments, the latest CommSec “SMSF Trading Trends Report” has found.
The report is based on a detailed analysis of the trading behaviour of active CommSec SMSF clients from 1 January to 30 June 2018.
With direct share trading in international shares becoming easier, and international companies now an unquestioned part of everyday life, adding an Apple or a Facebook to an SMSF portfolio has become an increasingly attractive investment option for SMSFs, the report said.
It found investment in exchange-traded funds (ETF) with an international focus continued to increase in 2018, with SMSFs using this investment option to increase their exposure to currency and property offshore.
Combined with rising asset values, the desire for diversification has resulted in growth of 8 per cent in SMSF ETF holdings, it said.
Internationally-focused funds now comprise nearly 47 per cent of all ETF trades.
SMSFs are also showing further signs of diversification with the increasing use of listed investment companies (LIC) and listed investment trusts (LIT) to gain exposure to new asset markets, the report revealed.
The value of international LIC and LIT trades by SMSFs has risen from 23 per cent to 26 per cent in the past six months.
Direct international share trades have also continued to climb, with the value of direct international share trades by SMSFs jumping by more than 57 per cent in the past year, with a growing focus on Chinese equities.
Commenting on the findings, Commonwealth Bank of Australia head of SMSF customers Marcus Evans said: “This trend to add international shares is strong among SMSFs who often use a core portfolio of ETFs or managed funds for diversification, then add high-conviction individual stocks, such as Facebook, Amazon, Apple, Netflix, Google or Berkshire Hathaway, in an effort to enhance performance.”
Evans added the interest in international diversification among SMSF investors extended beyond individual companies to ETFs available only on foreign exchanges, a trend expected to continue in the second half of 2018.
“The strength of this shift to increase offshore investment suggests it is being driven by a desire by SMSFs for greater diversification, rather than simply the relative performance of different markets,” he said.
On the Australian scene, SMSFs “know a bargain when they see one”, the report said.
While SMSFs have continued to focus on the Australian blue-chip stocks they know well, they have actively looked elsewhere for opportunities.
Seven of the top 10 performing stocks in the ASX 200 over the 12 months to 30 June 2018 are among the top 50 stocks traded by SMSFs.
SMSFs are also looking beyond the ASX 20 to a more diversified group of mid and small-cap companies, with ASX 20 shares now comprising 33 per cent of the total value of shares traded by SMSFs, down from 40 per cent at the same time last year, the report found.
