Retirement
SMSF funds showing off agility by repurposing portfolios
As markets continue to be volatile, self-managed super funds are showing their agility in the search for yield in a low-growth environment.
SMSF funds showing off agility by repurposing portfolios
As markets continue to be volatile, self-managed super funds are showing their agility in the search for yield in a low-growth environment.
According to CommSec’s SMSF Trading Trends Report, investors are being “tactical” as they face domestic and international political pressures.
CommSec senior economist Ryan Felsman discussed how investors have taken note of a year in two halves, with global sharemarkets down in the first half before rebounding strongly in the second.
For SMSF investors, the focus of trading activity on Australian and international markets has turned from buying to selling.
“It was quite tactical; it was a move away from those Chinese consumer-facing names like A2 Milk, but also Chinese supply chains around manufacturing were sold down,” Mr Felsman explained.
Where are SMSF funds putting their money?
SMSF investors were observed to have changed their portfolios as the federal election threatened franking credit policies.
“We’ve seen a tactical approach from SMSF investors in particular, repositioning their portfolios in advance of the federal election, where we saw political uncertainty around franking credit policies in particular,” he said.
This resulted in “net selling by investors in particular, mainly focused on financials, materials and communication sector”, Mr Felsman continued.
Despite the market rallying late in the year, SMSF investors were hesitant to buy equities, with global political risks and the chance of a Labor government.
“They are very savvy when it comes to the positioning of their portfolio, they were very aware of those policy uncertainties,” the economist explained.
At the same time, as many SMSFs reduced their holdings of individual stocks, investors also sought diversification to protect themselves from market volatility and secure sustainable yields for the longer term.
Exchange-traded funds (ETFs) and listed investment companies (LICs) continue to be seen as useful diversification mechanisms for SMSFs, despite a drop in trading activity and value for ETFs during the first half of 2019, according to the report.
In FY2018-19, SMSFs were net buyers of ETFs and LICs by traded value, with buys accounting for 58 per cent and 52 per cent of total traded value, respectively.
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