Trustees get a little more defensive

Co-founder of the Switzer Report
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Self-managed super fund (SMSF) trustees became more defensive in 2011/12, with a marginal re-weighting away from shares towards cash, term deposits, fixed income and direct property, data from the Australian Taxation Office (ATO) shows.

The ATO uses data based on SMSF annual returns, so the June 2012 results will be subject to further revision as more funds lodge their returns.

Key asset class weightings and changes during the year

* Listed trusts, which are usually listed property funds.

While the weighting by SMSFs to Australian shares dropped from 32% to 30% and on paper there was a reduction in funds, this occurred in a year where the S&P/ASX200 fell by 11.1%. Adjusting for this fall, there was actually a net inflow of new money into shares of approximately $11.1 billion.

Since July 1, the S&P/ASX200 is up by 7.9% – so the September quarter data is likely to show that this asset class is again the largest.

Another surprising result from the data is that despite most commentators agreeing that the Australian dollar is overvalued and heading below parity with the US dollar in the long run, trustees don’t appear to be keen to look offshore for investible assets. In pure dollar terms, offshore assets fell from $3.7 billion to $3.6 billion.

For the first time, the ATO has analysed the collective fund data by median fund size and provided some insight as to how investing behaviour changes depending on the size of the fund.

The largest funds (with more than $5 million in assets) have the highest weighting towards listed Australian shares at 33%, and the lowest weighting in cash and term deposits (24%). While somewhat of a generalisation, the following conclusions can be drawn:

Small funds

  • More cash & term deposits
  • Less listed shares
  • Less business & real property
  • Negligible collectables
  • Negligible offshore assets

Large funds

  • Less cash & term deposits
  • More listed shares
  • More business property
  • More unlisted trusts

During the 2011/12 financial year, the number of SMSFs grew by a net 35,300 (up from 28,000 in 10/11), taking the number of funds to 478,263. The average fund has 1.91 members, taking the total number of members to 913,500.

About 65% of members joining new funds are under 55 years of age.

Only 8.4% of all SMSFs have three or four members. This is somewhat surprising, given the potential advantages of bringing adult children into the fund and pooling the contributions to reduce the overall running costs of the SMSF, and perhaps more importantly, the horrendous fees that young people with small superannuation balances can face with industry or retail funds.

The full ATO report can be accessed at

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.

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