Investments, SMSFA, Superannuation

SMSFs outperform APRA funds

SMSF Performance Investments APRA funds SMSF Association University of Adelaide Research

New research shows SMSFs outperformed APRA-regulated funds on a rate-of-return basis for the 2022 financial year.

SMSFs outperformed Australian Prudential Regulation Authority (APRA)-regulated funds in terms of investment returns for the 2022 financial year by 4.1 percentage points, according to new research released by the SMSF Association.

The research, conducted by the University of Adelaide’s International Centre for Financial Services (ICFS), found the median SMSF had a rate of return (ROR) of -1.0 per cent compared with the median APRA-regulated fund that had an ROR of -5.1 per cent.

The findings were based on data supplied by BGL Corporate Solutions, Class and SuperConcepts covering 394,000 SMSFs, or 67 per cent of all SMSFs, with the difference between the ROR for the two sectors at its largest point in the six years research has been conducted.

Additionally, the research also found 38 per cent of SMSFs had positive returns in 2021/22 compared with less than 5 per cent of APRA-regulated funds.

SMSF Association chief executive Peter Burgess said the latest research provided more evidence for the overall strong investment performance of the sector, noting the difference between the ICFS figures and the ATO’s 2021/22 SMSF sector median investment return of -1.8 per cent was due to the use of a different data set.

“The data inputs and methodology used by the University of Adelaide are more closely aligned with the way the APRA fund sector calculates returns, so it provides a more reliable comparison of the relative performance of the two sectors,” Burgess said.

ICFS research project head Dr George Mihaylov said the SMSF performance results indicated many funds are diversified, but showed a strong home-country bias.

“In our opinion the outperformance by SMSFs was due, in part, to being underweight international equities and overweight domestic equities in a year where the local market outperformed some international markets,” Mihaylov said.

“We have shown in earlier research that less than 2 per cent of SMSFs hold international equities, most often with allocated weightings that are low. This is in stark contrast with APRA funds, of which a much larger proportion diversify internationally, typically with larger weightings.

“Although this home bias generally leads to suboptimal levels of investment diversification, it can also act to boost earnings and returns during periods where the domestic stock market outperforms some key international markets – precisely what happened in 2021/22 relative to the US.”

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