SMSF investors put time and money to work

Sophisticated investors with self-managed superannuation funds (SMSFs) are typically well-positioned to predict market trends, a new survey suggests.

The survey of 2,139 SMSF investors by research organisations Investment Trends and Rabobank Australia and New Zealand found that many adopted a more defensive stance prior to the recent slump in the share market, moving to blue-chip Australian shares and cash.

“While SMSFs are typically quite passive investors, last year saw a much higher than normal proportion tweaking their portfolio in order to adopt a more defensive stance,” said Investment Trends principal Mark Johnston.

Johnston said SMSF investors’ adoption of a more defensive stance in anticipation of the share market correction was evidenced by the following:

· 28 per cent changed their asset allocation in the past year, compared with just 18 per cent the previous year;

· of those 28 per cent, only 24 per cent had a positive outlook for Australian equities (compared with 42 per cent the previous year) and 14 per cent said they had actively adopted a more defensive stance; and

· many said they had ‘cashed-up’ in anticipation of a market correction.

At a media briefing in Sydney last week, Johnston said SMSF investors, particularly those with larger balances, had the time and/or the money to research the market in-depth and, consequently, tended to get better returns.

According to the survey results, 83 per cent of SMSF investors believe they outperformed the benchmark, with only 4 per cent believing they had underperformed.

While most SMSF investors did receive better returns this year than last (average returns were up 40 per cent to 17 per cent), the wealthier among them, including those with higher than average incomes, performed the best. According to Johnston, the above-average returns are a result of both the share-market’s record heights during the survey period (May 2006-07) and the fact that they had more cash products and better-diversified investments when the market correction eventuated.

RaboPlus head of financial services Bryan Inch said many SMSF investors are parking cash until they identify new investment opportunities.

“With the continued volatility in the markets, DIY [do-it-yourself] investors will increasingly look for less risk and more safe havens and diversify into high yielding online savings accounts, managed funds and listed property trusts.”

The survey also revealed that SMSF investors contributed larger sums of money than in previous years, with a marked increase in funds with balances of more than $1 million. As of May, SMSFs had an average balance of $741,000. Most SMSF investors were aged 50 or over, more than two-thirds were male and one third were business owners or self-employed.