Self-managed super fund (SMSF) trustees have shied away from cash due to falling interest rates but stayed close to defensive and low-risk assets, shifting funds into fixed interest and direct property investments.
AMP SMSF Administration head of technical services Philip La Greca said falling interest rates in the December 2012 quarter resulted in overall allocation to cash falling by 1 per cent during the March quarter to 23.4 per cent, its lowest point since the same quarter last year when cash holdings were at 22.9 per cent.
The total fixed interest asset allocation remained unchanged at 6.6 per cent compared to the December quarter, with a reduction in exposure to longer-term deposits of 0.6 per cent to 1.4 per cent in the March quarter.
Exposure to managed funds grew for the first time in two years, rising from 15.8 per cent in the December quarter to 17.4 per cent in the March quarter.
The statistics are drawn from the latest Multiport SMSF Investment Patterns Survey which covers 1950 funds – a sample of the SMSFs that Multiport administers, and the investments held at 31 March 2013. The assets of the funds surveyed represent approximately $1.8 billion.
“Lower interest rates during the quarter and the possibility of further cuts have meant cash has become a less attractive investment, so trustees are 'cashing out’ of cash and looking for other homes for their money,” La Greca said.
“The lift in the use of managed funds has occurred in the fixed interest and Australian equities sectors, possibly related to the search for an alternative to cash and term deposits, combined with a little more optimism in equity markets.
“Managed funds seem to be the preferred method of investing in overseas markets but there was also an increase in Australian equities, possibly due to softening in the mining sector leaving investors unsure of which stock to invest in,” La Greca said.
