SMSFs pull back from banks post-RC

Self-managed superannuation fund (SMSF) trustees seem to have been turned off investing in large institutions such as banks by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, according to SelfWealth chief executive, Andrew Ward.

SelfWealth, an online peer-to-peer network that showed the investments of the almost 40,000 SMSFs in its system, saw a drop in the popularity of banks in its quarterly rebalance from the December 2017 to March 2018 quarters.

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At the end of last year, the Big Four banks were strong amongst the top ten stocks held by SMSFs by popularity. Although they stayed in the top ten, by 31 March, 2018, the banks had dropped within that group.

Financials was also the most popular sector for SMSFs to invest in at the end of the December 2017 quarter, running at 40 per cent of the overall average SMSF portfolio on SelfWealth.

Currently though, the sector’s representation in SMSF portfolios was in the low 30s.

“I would hazard a guess that the Royal Commission, which was in the press then [the March quarter] a lot, impacted this,” Ward said.

“There’s [a] distrust of big institutions and what they might be doing or [going] to do … There’s been more flight away from asset allocation to big institutions in the last six weeks.”

SelfWealth had experienced an uptick in enquiries since the Royal Commission, as trust in institutional advisers fell.

Ward said that users were trusting the anonymous system more, looking at SelfWealth’s model portfolio and making decisions based on other investors that they followed.

Ward said that he had also seen a move toward diversification in SMSFs, with the average portfolio going from around 10 stocks to 16.

Outside of financials, materials also dropped slightly between the last two quarters, while SMSF investment in healthcare and ETFs rose.

Class also reported an uptake in ETF investment by SMSFs this week, with its SMSF Benchmark Report finding that funds’ investment in the instruments grew from $4.2 billion to $19.6 billion over the last five years.