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ETFs, Investments, Portfolio Construction

ETFs to remain popular for SMSFs

Vanguard predicts positive outlook for ETFs in SMSFs.

A leading exchange-traded fund (ETF) provider has predicted allocations from the SMSF sector to continue to be strong in 2019, aided by other trends in the financial services landscape.

“The interest in EFTs from SMSFs is still really strong, particularly with the rise of a lot of robo-advice platforms getting a lot of coverage in the media,” Vanguard head of ETF capital markets Damien Sherman told selfmanagedsuper.

“There are also other really good platforms in the market that make investing easier, so we expect that to continue.”

According to Sherman, the role passive EFTs play for advisers will also help their popularity.

“Indexing is a really easy story for advisers to sell because they can say ‘I’m looking after you, this is low cost and this is a well-constructed portfolio’. They don’t have to explain underperfomance,” he said.

“Having to explain underperformance really erodes trust, so I think ETFs are really positive from that perspective.”

Further, he confirmed investors were also still using ETFs in a core/satellite approach when constructing their portfolios.

“The conversations that we have with advisers tend to be around that type of strategy. They want indexing to be their core and then they’ll starting using active managers or go into direct shares on the outside [of the portfolio],” he revealed.

“So it very much is a common strategy.”

He pointed out some individuals are actually relying purely on index investing to achieve their wealth goals.

“You can increase the risk you have by just increasing the exposure to growth assets, so a lot of people are using that as a replacement for more active strategies,” he said.

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