SMSF allocations move beyond stereotypes
SMSFs have moved beyond the stereotype of conservatism indicated by high allocations to fixed income, property and blue chip shares, according to Multiport technical director, Phillip La Greca.
"There's such a wide spread view of allocations and returns now," he said.
"I've seen clients with massively poor returns, some guy who decides that he wants to go and invest in speculative mining stocks, and of course, no income, and then if they don't go up in value you see huge losses in terms of valuations.
"So you can have a performance that's quite severely negative, and yet other funds will have much more structured investment strategies that produce a very positive rate of return," La Greca said.
According to La Greca, that wide range of both strategy and result was part and parcel of SMSF diversity.
"It's not like when we talk about the larger funds and can identify the balanced fund performance, because every fund has a balanced option," he said.
Asked whether SMSF stereotypes, justified or otherwise, meant that the sector excelled in bear markets as opposed to bull, La Greca again pointed to funds' investment strategy as the only possible answer.
"In certain environments, there may be certain opportunities that SMSFs can't easily get to," he said. "But I think that's as far as it goes.
"The classic example is in things like infrastructure, which is a long-term investment that might have certain deferred payouts in terms of returns early on, but then have a much steadier stream as it matures," La Greca said.
The result, according to La Greca, was that SMSFs could quite easily buy in when particular projects were already up and running, but that getting in at the point of establishment was near to impossible.
"So you get the income stream, but you don't get the capital appreciation because you can't get in at the early stages," he said.
"So that is certainly a limitation related to [an] investment market environment, but the problem there lies in investment structure rather than allocation.
"Whether SMSFs outperform in bear markets versus bull markets or vice versa, it really comes down to strategy," La Greca said.
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