Sydney: September 27, 2007
Many self- managed superannuation funds (SMSF) took a more defensive stance before the Australian stock market correction with a move to blue-chip Australian shares and cash, according to a new survey of DIY investors concluded before the July-August correction.
The Investment Trends/RaboPlus DIY Investor survey of 2,139 self managed super funds found a number of SMSFs were anticipating a market correction, as shown by:
28 per cent changed their asset allocation in the preceding year, compared to only 18 per cent the year before.
Among those who changed asset allocation:
- The proportion citing a positive outlook on Aussie equities fell 43 per cent (from 42 per cent to 24 per cent).
- 24 per cent said they are accumulating cash
- 14 per cent said they were adopting a more defensive stance.
Investments in online savings and term deposits tended to be the largest transactions behind property (with no gearing).
'Waiting for a market correction' was a common theme among those investing in cash products.
Investment Trends Principal Mark Johnston said that: "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".
RaboPlus Head of Financial Services Bryan Inch said the survey - conducted in May this year well before the market correction - shows many SMSF DIY investors are liquidating property and cashing up. They are parking cash until they can make a decision on exactly what to invest in.
"With the continued volatility in the markets, DIY investors will increasingly look for less risk and more safe havens, and to diversify into high interest online savings accounts, managed funds, and listed property trusts," he said.
The survey also shows that a higher proportion of people were contributing larger sums of money compared to prior years, with the number of self-managed super funds with over $1 million invested markedly increased.
SMSF with higher balances were also using high interest savings accounts with 57 per cent of those who did so citing higher interest of online investment accounts as the main reason, while 23 per cent said they were 'parking cash', 17 per cent liked the flexibility/liquidity, and 10 per cent said they were waiting for the stock market correction.
When asked about how their SMSFs were performing, eight out of 10 SMSF investors believed they secured higher returns than average - with 83 per cent of funds saying they thought their returns were at or above the average for other super funds, and only four per cent believing they had underperformed other super funds.
Responses revealed that in the year to May 2007, SMSF returns had been considerably higher than in prior years. However, analysis shows those SMSFs with lower incomes and smaller investment portfolios tended to realise the lowest returns on their investment, while those with the highest returns typically had much higher than average personal income levels and more assets to invest.
Mr Johnston said that, while this pattern emerged at the poles, in between these extremes, results varied based on the asset allocation, investment selection and luck of the individual SMSF investor.
The research also found that among SMSFs using international managed funds, over 46 per cent said diversification of portfolio was the main reason to invest in managed funds with international equity exposure, and 25 per cent cited performance of funds particularly those with Asian exposure to take advantage of the growth in China.
As of May, SMSFs had an average balance of $741,000 with two per cent in online savings, three per cent held in cash in the bank and four per cent in term deposits, with varying amounts in other assets classes such as managed funds, residential or commercial property and shares.
The survey showed 82 per cent of DIY investors in SMSFs owned shares. With an average portfolio of just under $300,000, shares made up 35 per cent of all SMSF assets.
Over 70 per cent of SMSF investors were aged 50 or over, more than two thirds were male and one in three were business owners or self-employed.
About Investment Trends
Investment Trends is a specialist industry research organisation which provides new business insights and decision support information to most leading Australian financial services organisations. It combines analytical rigour and strategic thinking with the most advanced market research and statistical techniques to help its clients gain competitive advantage.
Investment Trends is headed by Mark Johnston. Mark has been a leading industry analyst in the brokerage, wealth management and financial planning industry since 1999, and has been widely quoted in the Australian media.
Investment Trends' clients include all of the top five Australian banks, the top 10 investment platform providers, the top five online brokers, as well as industry regulators, leading margin lenders, dealer groups and financial planning software providers.
http://www.investmenttrends.com.au
For further information please contact:
Mark Johnston
Principal, Investment Trends Pty Limited
Phone: 0400 841 995 (+61400841995)
mark@investmenttrends.com.au
Level 4, 62 Pitt Street, Sydney, NSW, Australia 2000
