Volatile markets a warning for SMSF trustees to diversify

Share market volatility proves a strong case for self-managed superannuation fund (SMSF) trustees to diversify their portfolios with a move into property, according to the Thinktank Group.

Thinktank’s Jonathan Street said in this investment environment, property offers a compelling story in terms of less volatility as well as capital income and growth.

“In the 12 months to 30 June 2018, the total return for Australian direct real estate was 11.7 per cent, evenly split between capital growth and income return,” he said.

Street said the returns from the different property sectors varied quite widely, with office rising from 12.8 per cent to 14.7 per cent, while retail fell to 8.4 per cent from 10.4 per cent.

The standout performer, though, was industrial property, where total returns for all locations were 12.5 per cent, up from 10.4 per cent last year.

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“It’s a sector of the market that SMSFs can overlook, yet the outlook is positive with the ACCI - Westpac Survey of Industrial trends up in the September quarter to 66.5 from 64.1 in June, while the AiG PMI for September was up 2.3 points to 59, marking two years of uninterrupted expansion above 50,” he said.

Street said the industry trend numbers, alongside macro indicators spanning GDP, employment and inflation, were positive indicators supporting the health of the industrial sector, and Sydney and Melbourne were showing the strongest capital growth with total returns of 13.7 per cent and 12.8 per cent, respectively.