SMSFs shifting focus for diversification

Australia's self-managed superannuation fund investors are gaining confidence in international equities and paying more attention to new, innovative sectors.

New data from nabtrade shows SMSF investment in international shares, domestic ETFs, mFunds and partially paid shares surged over the 12 months to 15 December 2017.

While investment in traditional equity holdings remained solid with 13.5% growth, investment in ETFs and partially paid shares grew by 55% and 51% respectively, and preference shares saw an increase of 34%.

This is attributed in part to ETFs enabling greater diversification via less traditional, high growth sectors such as robotics and aerospace. Tencent, Tesla and Nvidia joined Amazon, Apple and Facebook as some of the most heavily traded international stocks last year by SMSFs.

"International trading surged nearly 100% over the previous year, with US equities and US ETFs the most traded equity instruments on international markets throughout the year,'' NAB director of SMSF and customer behaviour, Gemma Dale, said.

Further, the amount invested in mFunds almost tripled over the 12 month period while money moved away from floating rate notes and options.

Dale said SMSF investors were active in equity markets in 2017, with total portfolios up more than 15% on the previous corresponding period.

"The analysis shows that investors are getting comfortable with the more exotic equity instruments in the market and are prepared to spread risk. Low levels of volatility and the strong performance of domestic and international markets gave investors' confidence to look for new opportunities,'' Dale said.

Financials and materials remained the most heavily traded sectors, accounting for 36% and 17% of the year's turnover. Telecommunication services, healthcare and consumer discretionary stocks also proved popular.

The top 10 domestic equity investments for SMSFs comprised the big four banks, Telstra, BHP Billiton, Wesfarmers, CSL, Woolworths and Woodside Petroleum.

Separately, new data released by the Australian Taxation Office shows returns from the SMSF sector in 2015-16 were on par with that of APRA-regulated funds. The figures also show the sector having grown by 26% over the last five years.

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