ETFs, Investments

Diversification driving SMSF ETF usage

The latest specialised industry research has shown the most common reason SMSF trustees use exchange-traded funds (ETF) is to improve the diversification of their investment portfolios.

The “BetaShares/Investment Trends Annual ETF Report for 2018” revealed 77 per cent of SMSF investor surveyed said they use ETFs for diversification purposes, compared to 75 per cent of all ETF investors surveyed.

Similarly, 65 per cent of SMSF investors taking part in the study said they use ETFs for access to overseas markets. By comparison, 56 per cent of all ETF investors cited this as a reason to allocate to these vehicles.

“Diversification is really important for all [investors], but even more important for SMSFs. Access to overseas markets is important to all, but even more important to SMSFs,” Investment Trends chief executive Michael Blomfield said.

The research also highlighted three other areas that were more significant for SMSF trustees in terms of the role ETFs play when compared to the larger peer group.

Liquidity was one of these, with 34 per cent of SMSF trustee respondents citing this as a reason to use ETFs. By contrast, this characteristic compelled 28 per cent of all ETF investors to do the same.

In addition, 33 per cent of SMSF trustees said they used ETFs because they provided access to specific types of investment, whereas 27 per cent of all ETF investors named this as a motivating factor for an allocation.

Finally, the access to specific sectors ETFs enabled was why 32 per cent of SMSF trustees invested in them, while this was an important factor for 21 per cent of all ETF investors.

“[With regard to] the access to particular forms of investment, fixed income has been growing really quickly [and] the smart beta offerings, [as well as] access to US currency,” Blomfield noted.

“All these other products are quite a strong draw for SMSFs.”

The research was conducted between August and October 2018 attracting 7900 valid responses including 2486 respondents currently using ETFs.

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