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Investments, Superannuation

SMSFs look beyond mainstream allocations

SMSF international alternative

The low interest rate environment is driving SMSF investors into higher allocations to international and alternative assets compared to non-SMSF investors.

SMSF investors are currently taking greater positions in international shares and alternative assets than their retail superannuation peers due to the lower interest rates offered on cash and term deposits, according to an investment platform.

Speaking to selfmanagedsuper, Powerwrap chief executive Will Davidson said 57 per cent of the platform’s investors, which currently has $8 billion in funds under administration, had an SMSF which provided the group with insights into how they were investing compared with other superannuants.

“SMSFs are holding less cash than other investors at around 10 per cent, compared with 18 per cent for non-SMSF super and pension accounts, but what we are also seeing is that SMSFs have an allocation to alternatives of about 10 per cent as well that is being switched over from cash,” Davidson said.

“The allocations to direct international equities have also increased to around 10 per cent, switching out of managed funds, as a result of lower interest rates.”

Davidson said these direct holdings were in comparison to non-SMSF superannuants who typically held about 1 per cent of shares directly but he noted the SMSFs had stuck with well known names and brands.

“Those who are buying and holding international equities are doing so in the same way they buy and hold Australian equities, they are picking the top stocks, usually in the US. Their view is what is the point of buying these stocks through a managed fund and paying a fee when they can access them directly via the platform,” he said, adding that Powerwrap has access to international shares with 19 exchanges across the world.

Davidson said SMSF investors were also looking at alternative property investments and mezzanine debt and property development were attracting more attention from the SMSF sector.

“Debt versions of these investments are popular and were only previously available from the major banks but this changed two years ago when the Australian Prudential Regulatory Authority (APRA) changed corporate lending rules.”

“This has led to growth in the market and we are seeing fragmented, syndicated property investments outside of REITS that are offering people new ways to get parcel sized investments that are suited for the retail investor.”

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