SMSFs, on average, outperformed Australian Prudential Regulation Authority (APRA)-regulated funds over the five years to June 2023, despite lagging marginally behind them during one 12-month period, 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 SMSFs outperformed APRA-regulated funds by 1.2 percentage points over the five years to 30 June 2023 and the five-year annualised rate of return (ROR) on the former was 6.5 per cent compared with 5.3 per cent for the latter over that period.
The ICFS based its research on data from 421,000 SMSFs, which was supplied by BGL Corporate Solutions, Class and SuperMate, and represents 69 per cent of all those type of funds, with project leader Dr George Mihaylov noting it was the largest independent study of its kind.
Mihaylov noted the overall outperformance of SMSFs compared to APRA-regulated funds was tempered by the fact the median ROR for the former was behind the latter in 2022/23 by 1.8 percentage points, at 6.6 per cent compared with 8.4 per cent, due to a lower weighting to international equities by SMSFs.
He also pointed out there was a spread in performance for SMSFs in 2022/23 where minimum RORs in the top quartile outperformed those of APRA funds in the same category (11.6 per cent versus 9.3 per cent).
At the same time, the bottom quartile of SMSFs underperformed, achieving maximum RORs of 1.6 per cent versus 8 per cent for the lowest APRA fund quartile.
Mihaylov said the performance difference between SMSFs with balances below and above $200,000 had been evident since the research project began.
“This year, however, we noted a very significant difference in the performance of the two cohorts, with large SMSFs generating a 7 per cent median ROR compared with just 0.4 per cent median ROR for smaller SMSFs,” he said.
Performance differences were also noted between advised and non-advised funds, at 7.6 per cent versus 6.4 per cent for the 2023 financial year.
SMSF Association chief executive Peter Burgess said the research, first commissioned by the industry body in 2021 and now in its fourth year, highlighted the consistency of investment performance in the sector.
“The research contributes to the mounting evidence that SMSFs deliver strong investment performance over the long term,” Burgess said.
He also noted the higher RORs for larger balances and advised SMSFs highlighted the aspirational benefits of such a fund and the role advisers had in helping trustees to diversify their investment portfolios.
“It has always been our mantra that SMSF trustees achieve better outcomes when they have access to professional SMSF advice,” he said.
The research echoes recent statistics from the ATO, which found the return on assets for SMSFs was above 10 per cent for the 2023 financial year and funds with balances over $200,000 performed better than those at lower levels.
