SMSFs account for 20 pct of ETF investments

SMSFs ETF investments

SMSFs account for around one in five investors in ETFs with that number growing steadily as the overall ETF market continues to head past 2 million investors.

More than 20 per cent of exchange-traded fund (ETF) investments are held by SMSFs with that number continuing to grow in tandem with the increased use of ETFs by retail investors, according to research released by BetaShares.

The fund manager stated the number of SMSFs holding ETFs had grown to 400,000, up from 370,000 in 2020, and the percentage of investors holding ETFs via an SMSF remained steady at 21 per cent.

The figures were contained in the “2022 BetaShares/Investment Trends ETF Report”, which found 1.9 million investors now use ETFs in their portfolios and an additional 230,000 investors were expected to invest in them for the first time in 2023.

The report highlighted that investors regarded ETFs as a key part of their investment strategy and 32 per cent now use them as the core of their portfolio, compared with only 4 per cent in 2019.

SMSF and non-SMSF investors used ETFs in similar ways and after strong inflows to funds that had exposure to international equities, non-SMSF investors reported holding more Australian equities (78 per cent) compared to international equities (76 per cent).

In comparison, SMSF investors held more international equities (78 per cent) than Australian equities (72 per cent) and also differed marginally in their other portfolio holdings.

While both non-SMSF and SMSF investors held thematic ETFs (27 per cent and 28 per cent respectively), SMSF investors had much higher exposure to Australian property investments (28 per cent compared to 17 per cent for non-SMSFs), while SMSFs opted for infrastructure (22 per cent) compared to responsible investments for non-SMSF investors (19 per) to round out their top five ETF asset classes.

BetaShares senior investment strategist Cameron Gleeson said the growth of SMSFs holding ETFs stems from trustees being early adopters of exchange-traded products.

“At that point, SMSFs were attracted to the transparent, convenient and cost-effective nature of ETFs and used the popular investment vehicle to obtain exposure to more difficult to access asset classes, like international equities,” Gleeson said.

“Fast forward to 2022 and more SMSFs than ever before are holding ETFs as they continue to take advantage of the inherent benefits of ETFs to build and grow their retirement nest egg.

“They are now using ETFs for portfolio completion across all asset classes, for example, replacing high-cost active unlisted funds in fixed income and using ETFs in place of direct ASX (Australian Securities Exchange)-listed stock holdings for greater diversification.

“The choice of ETF exposures on offer has steadily increased to include asset classes like listed property, infrastructure, equity sectors and thematic exposures.

“We expect the number of SMSFs holding ETFs to steadily grow in line with growth from previous years, particularly as more investors of all types use ETFs to progress on their financial goals.”

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