A growing number of SMSF trustees are increasing their portfolio allocations to international equities for a variety of reasons, according to a share trading platform.
“From our perspective we see 15 to 20 per cent of our total flow go offshore daily … and self-managed super [fund trustees] are a more active participant than general investors in international trading because they want to get that exposure,” CMC Markets Asia-Pacific head of partners and institutional Andrew Shade told selfmanagedsuper.
Shade pointed out SMSF trustees are looking for value growth they need that the local shares they currently hold cannot deliver, but this is not the sole motivation for their interest in overseas markets.
“There are a number of things driving this sort of activity. These include the demand for diversification across jurisdictions or asset type, the growth opportunity and investing in innovative technology we are not doing here,” he explained.
“I find our self-managed super fund cohort very serious about their investing and ‘smarter than the average bear’. They actually devote a lot of their time to this.”
He revealed SMSF clients trade in both direct shares and exchange-traded funds (ETF) and preferences can depend upon the investing experience of the individual.
“Entry-level investors typically use ETFs and of our top five ETFs, three of them have international exposure. So an ETF is an easy way in,” he said.
He also recognised SMSF trustees gravitated towards the Magnificent Seven stocks, Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla, when looking at participating in the United States market.
“That’s because information about them is readily and freely available, their performance is well known and from a liquidity perspective, now you can trade them on our platform and it’s completely seamless so trading a US security is the same as trading an ASX (Australian Securities Exchange) share,” he noted.
He indicated this trend is expected to continue into the foreseeable future.
“So 15 to 20 per cent of our flows are into foreign markets daily and that depends on the day and what’s happening of course. We’ve also seen 20 per cent growth over the last few years. So if you use the rule of 72 compounding, if international trades are at 15 per cent now, in four years’ time that’s going to be 30 per cent and in a further two years that will be 60 per cent of our flow,” he predicted.
“I don’t think it will be flatlined like that, but that’s where it’s heading.”
