The latest data from the ATO shows that SMSFs are massively underweight offshore investments, compared to their institutional counterparts and the exposures recommended by the traditional asset allocation models. The ATO reports that offshore investments by SMSFs stand at $11 billion out of a total investment pool of $746.6 billion, a weighting of just 1.5%. A typical weighting under the traditional models for a “growth” portfolio should be in the order of 25% to 30%, for a “balanced” portfolio 15% to 20% and even for a “defensive” portfolio”, 5% to 10%.
Due to classification issues with how trustees report holdings of ASX-listed international products, the ATO’s figures are on the low side. And with the tax benefits from franking credits, there’s a good reason for trustees to have a bias for local shares. But even so, the hometown bias is extraordinary. Is this because some trustees don’t know how to invest offshore, or following a decade long bull market, feel that it is too late to invest offshore?
My answer to the second question depends on the level of exposure and investment objectives, and is based on the premise that “time in the market” rather than “timing” will work better for most investors. Hence, if you are a long term investor with limited offshore exposure, then “no”, it is not too late. If you’re worried about the market, an alternative to broad market exposure might be to invest with a conviction style manager who might be less impacted by a market down-turn.