SMSF trustees have continued to reduce their exposure to the ASX’s top 10 stocks by market capitalisation as they maintain their search for greater yield and capital growth, according to the SuperConcepts SMSF Investment Patterns Survey.
In the March 2016 quarter, investments in the ASX’s top 10 shares by market capitalisation were significantly reduced from 20 per cent of fund assets invested in 2015 to 14 per cent at 31 March 2016.
SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca said the continued volatile markets are driving trustees to search for investments that drive better returns.
“We’ve seen a significant amount of SMSF trustees diversify away from Australia’s largest stocks. However rather than investing in different asset classes, we’re seeing a trend where trustees are investing in mid and small cap stocks on the ASX.
“It has been an effective strategy with the strong performance of smaller companies on the ASX helping to drive better returns than the index for SMSF trustees,” he said.
The trend to invest in other stocks on the ASX has seen the overall allocation to Australian shares increase marginally from 35.4 per cent to 35.8 per cent over the quarter.
“While many trustees have benefited from this approach, there still remains an opportunity to further improve diversification with SMSF trustees continuing to be heavily weighted in domestic equities,” Mr La Greca said.
During the March 2016 quarter, investments in international equities decreased slightly from 12.9 to 12.6 per cent while funds invested in fixed interest remained steady at 12.3 per cent. Investments in cash increased 0.4 percentage points during the quarter, now representing 18.4 per cent of all assets held.
“Over the past two years we’ve seen the amount invested in cash continue to increase with many trustees deciding not to renew term deposits in the current low interest rate environment,” Mr La Greca said.
Contribution levels to SMSFs in the March quarter were at the lowest level in two years with the average contribution inflow per fund $5,426, down from $6,393 the previous quarter.
“While we typically see a decline in SMSF contributions during the March quarter, this year has been particularly low. This could be a result of concern about speculation on proposed superannuation changes which was top of mind for many trustees during the quarter,” Mr La Greca said.
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The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,900 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 March 2016. The assets of the funds surveyed represent approximately $3.1 billion.
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