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SMSF managed fund use favours global stocks

SMSFs are continuing to favour international fund managers within their portfolio mix.

Allocations to international equities account for 51.6 per cent of all holdings SMSFs have in the top 20 most used managed funds, according to a Class report.

The SMSF administrator’s December 2018 SMSF Benchmark Report, “How SMSFs invest in managed funds” however revealed when examining a broader set of over 3000 managed funds used the allocation to global equities drops to 34.1 per cent, but is still the top asset class.

“This is likely because where SMSFs only hold one or two managed funds, their preference is to invest in managed funds that focus on international equities,” the report said.

On this occasion the benchmark report examined a larger group of over 3000 managed funds held by SMSFs to gauge how asset allocation might differ across that wider set.

The analysis showed SMSFs with managed funds have more than twice the investment in international equities than across all SMSFs and 10 times that of SMSFs that did not use managed funds.

For SMSFs that invest in only one managed fund the examination found 32 per cent of them are invested in international equities, while for funds that use two managed funds 55 per cent of the time at least one of the two funds will be invested predominantly in international equities.

The research also showed as SMSFs increased the number of managed funds they use, so too did the number of asset classes in which they were invested.

For example by the time an SMSF is holding four managed funds, 52 per cent of the time at least one of them will be targeting Australian equities.

Other findings include SMSFs invested in the 20 most used managed funds have higher holdings in cash than the broader set, with 13.5 per cent allocation in the former set, compared to a 9 per cent allocation in the broader set.

Further the study revealed SMSFs with managed funds have fewer holdings in direct property, holding 9.8 per cent lower than all SMSFs and 16.5 percentage points lower than SMSFs with no investment in managed funds.

“Direct property tends to be a more hands-on investment, with fewer professional fund managers supporting this asset class,” the report said.

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