Self-managed super fund (SMSF) trustees hold only four different types of securities and have a strong leaning towards the big bluechips that make up a significant share of the ASX 200, according to recent analysis conducted by CMC Markets.
Citing the research, which was conducted on CMC Markets Stockbroking's SMSF clients, Andrew Rogers, head of CMC Markets Stockbroking, said that the popularity of equities, particularly direct equities, was not surprising given the asset class' tax effectiveness and ability to offer both capital growth and an income stream via dividend payments.
"With interest rates at historic lows, it's no surprise the largest proportion of asset allocation for Australia's SMSF sector is now listed shares," he said.
"We expect to see an even greater shift from cash and term deposits to listed shares if interest rates continue to remain at current levels as many are predicting.
"Direct shares allow the trustee complete control and transparency over the portfolio along with flexibility in terms of buying and selling at the time of the trustee's choosing – not at the time it suits a super fund, for example," Rogers continued.
"This gives trustees the ability to pursue ethical or other investing agendas and to adjust and rebalance the investment portfolio in line with their own bespoke model to achieve the outcomes they want."
According to Rogers, the big question is, with the big banks, energy and materials stocks already priced high, will SMSF trustees venture into other sectors or seek to increase the number of companies represented in their portfolios?
"If this does occur, the potential volumes we're talking about may have a material effect on pricing and the weightings of the ASX 200 benchmark," he said. "So it's a space we're watching with great interest."
Rogers said that CMC Markets' analysis had also examined top shareholdings by state.
"Our analysis found that SMSFs on the eastern seaboard showed a particular preference for financial and bank stocks whilst SMSFs in Western Australia were more likely to hold energy and material stocks," he said.
"Queenslanders were heavier in stocks across foods and staples such as Woolworths (WOW) and Wesfarmers (WES)."
"So while there are geographical variations, it seems that a penchant for the big name stocks is the constant," Rogers added.
"Over the next year or so we will be keeping a close eye on where the SMSF dollars are going, so we can anticipate trends and also look at adding more features to our trading platforms to add value to our SMSF clients."
Originally published by SMSF Essentials.
