ETFs, Investments

Global exposure growing in importance

SMSF allocation international assets

Having an investment allocation to international assets is increasing as a priority for SMSF trustees, according to the latest sector research.

The latest research into the SMSF sector has shown an making an allocation to investing in overseas markets is becoming increasingly important for trustees, regardless of whether or not they currently receive financial advice.

The “2019 Vanguard/Investment Trends Self-managed Super Fund Reports” revealed trustees on average currently allocate 11 per cent of their fund’s investment portfolio to overseas assets, but in a year’s time they expected this to jump to 16 per cent, regardless of their advice situation.

“We’ve looked at that across the advice channels that they use and what I’d say about this, that is most important, is it actually doesn’t matter. So whether you get advice from a planner, an accountant or whether they don’t use advisers, all of these groups of people are intending to increase their exposure to international assets in the next 12 months,” Investment Trends chief executive Michael Blomfield said.

With regard to the regions SMSF trustees would like exposure to, 43 per cent of respondents named multiple regions, with 37 per cent favouring the United States and North America and 25 per cent wanting an allocation to Asia excluding China.

“How do they intend to do that? Well, the largest group of people – 43 per cent – say they intend to do it through an ETF (exchange-traded fund),” Blomfield said.

To this end, 33 per cent of participants expressed the intent to achieve their global asset exposure through Australian Securities Exchange-listed shares with overseas operations and another 33 per cent were looking to achieve their portfolio allocation to offshore markets via managed funds that are actively managed.

The study also showed trustees without a current portion of their portfolio invested in overseas assets downplayed the importance of having investment diversification in their funds.

“Here 81 per cent of trustees with exposure to international assets believe that diversification is really important, whereas only two-thirds of those who don’t have international exposure think diversification is really important,” Blomfield noted.

With regard to elements trustees with no exposure to international assets felt were holding them back from this type of portfolio allocation, 41 per cent of respondents cited a lack of knowledge of overseas markets, 35 per cent named currency risk and 23 per cent said it was a lack of knowledge about what to invest in.

The research was based on a survey of 4927 investors and 286 financial planners between February and April. The study also revealed SMSF trustees found investment decisions being the most challenging part of running their own super fund.

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