SMSFs take up borrowing arrangements

Self-managed super fund trustees are taking advantage of new limited recourse borrowing arrangements to invest in both property and other financial assets, according to SMSF administrators Multiport.

Around 13 per cent of funds administered by the firm are now utilising a borrowing arrangement, according to a survey of 1,400 SMSFs that represent around $1.25 billion in assets.

A slight majority of these were borrowing to invest in property, with 56 per cent compared to 44 per cent borrowing to invest in other financial products. The property loans were also of larger value, at $200,000 compared to $110,000 for other assets.

Average asset allocations remained largely steady over the quarter, with the biggest shifts in international equities exposure, which increased from 7.1 per cent of overall assets to 8.8 per cent in the three months since 31 December 2010; and assets in alternatives such as hedge funds, agribusiness and private trusts which dropped from 2.1 per cent to 1.3 per cent.

Multiport also announced an integrated gearing package in addition to its core administration services, which takes care of documentation and loan applications through the entire process.

“The rules around gearing a property in a SMSF are complex and it’s essential to tailor the right loan to suit the needs of the trustee,” said Multiport chief executive John McIlroy (pictured).

“We have seen a marked increase over the past 12 months in adviser and trustee enquiry rates around gearing into SMSFs. However, there remains confusion around the process and what needs to take place in order to complete the purchase smoothly. This solution fills the void,” he said.