Self-managed super fund asset shifts to 2022

Self-managed super funds (SMSFs) are no longer Australia’s premier superannuation segment, but they still hold $894 billion on behalf of 1.1 million members through 605,470 funds.

The growth of SMSFs has slowed dramatically since the introduction of the Transfer Balance Cap in 2017.

In the five years ending March 2022 their total assets had grown only 5.4% p.a., about half the 10.1% p.a. rate of the not-for-profit super fund segment.

Retail super funds grew even slower than SMSFs, increasing just 3.1% p.a.

“Despite these dampened metrics, the SMSF segment is still a huge pool of capital, particularly for fund managers able to attract it,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.

According to the Australian Taxation Office, almost one dollar in every five held in SMSFs is in a pooled investment product, being a managed fund, a life insurance policy or some type of collective trust.

This equates to $168 billion, almost half the size of the entire retail managed funds sector—which makes it a significant funds management opportunity, particularly as this SMSF allocation has consistently increased.

In 2020 Rainmaker highlighted that SMSFs were well positioned in COVID-19 due to a large exposure to cash, which sat at around a quarter.

The exposure to cash has since declined, and this is the continuation of a trend occurring since 2013, with exposure to cash peaking at 33%.

SMSF assets held in equities and property has stayed remarkably stable as it appears locked at around 36% and 16% respectively.

Shifting our gaze to fixed interest, on the other hand, reveals it to be not only growing in percentage share terms, but in nominal terms it is showing explosive growth.

Since 2013 SMSF fixed interest holdings have grown five-fold.

“While equities, property and other asset classes have stayed steady, pooled investments and fixed interest appear to be where funds are being diverted.”

“SMSF investors appear to be maintaining a preference for the more risk averse asset classes, but a surge in interest rates may play a role in returning funds back to cash,” said Dunnin.