The latest SuperConcepts “SMSF Investment Patterns Survey” for the first quarter of 2023 has shown trustees are shifting their investment preferences away from cash and short-term deposits towards fixed interest and longer-term deposits.
According to SuperConcepts technical and strategic solutions executive manager Philip La Greca, trustees are turning to longer-term deposits partly to capitalise on higher interest rates following the Reserve Bank of Australia’s 3.5 percentage-point increase in the official cash rate for the year ending 31 March 2023.
“[There has been] a notable decrease in cash holdings among SMSFs. Cash holdings have decreased from 11.9 per cent as of 31 December 2022 to 10.2 per cent in the current quarter,” La Greca noted.
“Furthermore, there has been an increase in domestic fixed interest investments, driven primarily by recent increases in the official cash rate. As a result, longer-term term deposits have become an attractive investment option for SMSF trustees.”
To that end, the study showed a 2.1 per cent increase in trustee investment in domestic fixed deposits, with term deposits being the preferred choice.
La Greca noted the increasing popularity in investing in term deposits was due to the fact the financial landscape had shifted and the option had become much more viable for trustees.
“There are now more competitive term deposit rates available and banks are becoming more aggressive in regards to the offerings,” he told selfmanagedsuper.
“[Previously] when the offerings weren’t great, there was little advantage in putting money into term deposits when it wasn’t paying much more than cash.”
Further, investment in domestic shares on the Australian Securities Exchange experienced a slight decline, however, direct shares remained popular among SMSF trustees and accounted for the majority of their investments.
“Australian equities still represent the largest portion of the SMSF investment pool at nearly 39 per cent. This has fallen due to the slightly negative performance of the equities market over the year. Most exposure is done by direct investment in the Australian share market,” the survey noted.
The survey analysed the assets of over 4300 funds administered by SuperConcepts, with a total value exceeding $7 billion.
These findings contrast with the previous survey for the last quarter of 2022, which showed trustees shifting back to cash products to meet their liquidity requirements.