Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 168

SMSF asset allocation changes unexpected

There has always been considerable misinformation surrounding the asset allocation of SMSFs. The main reason is the inadequate categorisation and long-time lags in the ‘official’ Australian Taxation Office (ATO) statistics. Cuffelinks has discussed this directly with the ATO, as reported in previous articles here and here.

The main shortcoming is that the category ‘Overseas shares’ only includes direct share investments, and excludes the billions invested through listed and unlisted trusts and other managed investments. When I confronted the ATO on overseas share asset allocation, their response was:

“It’s fair to say a substantial amount is in international equities, much larger than the number quoted under the ‘Overseas shares’ category.”

According to the official statistic, less than 1% of SMSF assets resides in ‘Overseas shares’. Considering that SMSFs hold one-third of our $2 trillion in superannuation assets, this inaccuracy is a major shortcoming. In fact, people marketing global funds often take advantage of this low number, imploring trustees to correct their ridiculous asset allocation mistake and invest in their global fund. The truth is, trustees are already using hundreds of other available global channels.

A more accurate SMSF asset allocation number

SuperConcepts has released its 2016 Financial Year Analysis based on the actual investments of about 3,300 SMSFs administered by its subsidiary Multiport. Due to its relationship with AMP, this group has more financial adviser input than the average SMSF, giving a greater allocation to managed funds and global equities, but it is instructive of SMSF trends nonetheless.

Asset allocation of sample SMSFs as at 30 June 2016



The interesting and sometimes unexpected changes in the last year include:

  • A fall in equity investments, with domestic down from 37.1% to 34.5%, and international down from 14.1% to 13.1%, refuting the claims about the TINA (There Is No Alternative to equities) mentality in the sector. SuperConcepts attributes this fall to trustees reducing their exposure during periods of higher volatility, and less appeal of the local large cap stocks. Among the most commonly held investments, two pooled structures, Magellan and Platinum, are favourites with this group for global exposure.

Over the course of 2015/2016, the amount held in the top 10 listed securities fell from 16.5% of all investments to 14%. The Top 10 shares by market cap still represent about 38% of Australian equities held by SMSFs, but the reduction recognises that investors are more concerned about the capital growth of the banks, BHP, Newcrest, and Telstra. Increasingly, SMSFs are looking for opportunities outside of the large caps.

  • Cash holdings have increased from 17% to 18% despite low interest rates. Within this segment, term deposits rose more strongly than at-call cash, which took a hit in the last quarter in the face of falling cash rates. It’s surprising to see the large allocation in this segment.


  • Property has been the big winner, up from 18.3% to 21.7%, including both listed and unlisted segments. Direct property (often business premises held by the SMSF and rented to one of the trustees, rather than residential property) rose steadily, but the major increase came in the ‘other’ category of syndicates and unlisted trusts. With listed A-REITS trading at a hefty premium to NTA, unlisted trusts have benefitted from the search for yield at better prices.


  • Fixed interest allocations fell overall, but hybrids and direct holdings rose. Managed funds in this segment comprise only 4.4% of assets, losing out badly to cash.

(The full report also looks at market movements versus funds flow and makes the same conclusions regarding increases in cash and property and reductions in fixed interest and equities).

Trustees take cash flow decisions in the final quarter

Both inflows and outflows from SMSFs are always at their highest in the June quarter as trustees take action before the end of the financial year. However, with uncertainty surrounding the May 2016 budget, average inflows to SMSFs in the June 2016 quarter of $10,700 were the lowest since 2012. June withdrawals are also heavy, at $17,800, as trustees ensure they meet minimum pension requirements. Withdrawals are always heavier than contributions in any quarter, showing how much the continuing growth of SMSF balances relies on market performance.

Checking from another source

We checked these numbers against the Vanguard/Investment Trends March 2016 SMSF Investor Report, based on a survey of 3,531 SMSF trustees. Its major findings are consistent in direction and include:

  • Direct shares (outside of managed funds and ETFs): 38% of total SMSF assets in 2016, down from 41% in 2015
  • Cash and other cash products: 25%, up slightly from 24% in 2015
  • ETFs: now at 3%, up from 2% in 2015
  • Managed funds: 10%, up from 9%
  • Direct property (residential & commercial): 11%, up from 10%
  • Other investments: 13%, steady

Investment Trends believes the allocation to direct shares (outside of managed funds and ETFs) has declined over the past three years as a result of market performance and poor investor sentiment towards individual shares.

Marketing opportunities

These SMSF investment patterns suggest there are good opportunities for bond funds and other cash alternatives, ex-20 Australian equity funds and other global equity funds. Property is popular but managed funds miss out to direct property, unlisted and syndicates.


Graham Hand is Editor of Cuffelinks. See the full Investment Patterns Survey here. SuperConcepts is a Cuffelinks sponsor.

August 17, 2016

SHL, VOC, SLK, NAN, RMD (all now sold), ASX, WAX, CAR, SEK, MQG, VRT and some others (all still held).
No other banks, resources or TLS.

August 17, 2016

So Rob, you know what the next question is!

August 15, 2016

I should have clarified, the 60% allocation to ASX was not simply via index, but in selected individual stocks, so yes it was stock picking per se, but nevertheless was still also a 60% allocation to ASX shares, so both statements are correct.
The return is audited, post contribution, after costs/tax credited return to member statements.

SMSF Trustee
August 13, 2016

With respect Rob that allocation could not have returned anything like 15%.
None of those three asset classes delivered anything like that, not even double digits.

Maybe it was the individual shares you had. Some did well, like ASX or Wesfarmers or many small caps. But that is stock selection not asset allocation that got you that return.

How did you calculate that return? I have seen many people over the years claim to have got a great return and ridiculed fund managers, but when I've gone through how they calculated it, they had simply not done it properly. Not saying you haven't, but it's easy to make a claim like that without any evidence. And as I said, your asset allocation could not have given you that return in 2015-16, it's not mathematically possible.

August 11, 2016

Thanks Graham,
My own SMSF allocations have not changed in the past 12 months with approx. 15% cash, 25% overseas equities (via LICs) and 60% domestic equities. This allocation returned ~15% in FY16.


Leave a Comment:



SMSFs and COVID: the biggest trends in 5 charts

What is happening with SMSFs? Part 2

Six advantages of an SMSF


Most viewed in recent weeks

Super changes, the Budget and 2021 versus 2022

Josh Frydenberg's third budget contained changes to superannuation and other rules but their effective date is expected to be 1 July 2022. Take care not to confuse them with changes due on 1 July 2021.

Noel's share winners and loser plus budget reality check

Among the share success stories is a poor personal experience as Telstra's service needs improving. Plus why the new budget announcements on downsizing and buying a home don't deserve the super hype.

Grantham interview on the coming day of reckoning

Jeremy Grantham has seen it all before, with bubbles every 15 years or so. The higher you go, the longer and greater the fall. You can have a high-priced asset or a high-yielding asset, but not both at the same time.

Whoyagonnacall? 10 unspoken risks buying off-the-plan

All new apartment buildings have defects, and inexperienced owners assume someone else will fix them. But developers and builders will not volunteer to spend time and money unless someone fights them. Part 1

Buffett says stock picking is too hard for most investors

Warren Buffett explained why he believes most investors should not pick stocks but simply own an S&P 500 index fund. "There's a lot more to picking stocks than figuring out what’s going to be a wonderful industry."

Should investors brace for uncomfortably high inflation?

The global recession came quickly and deeply but it has given way to a strong rebound. What are the lessons for investors, how should a portfolio change and what role will inflation play?

Latest Updates

Exchange traded products

ETFs are the Marvel of listed galaxies, even with star WAR

Until 2018, LICs and LITs dominated ETFs, much like the Star Wars franchise was the most lucrative in the world until Marvel came along. Now ETFs are double their rivals, just as Marvel conquered Star Wars.


Four leading tech stocks now look cheap

There are few opportunities to buy tech heavyweights at attractive prices. In Morningstar’s view, four global leaders are trading at decent discounts to their fair values, indicating potential for upside.


Why copper prices are at all-time highs

Known as Dr Copper for the uncanny way its price anticipates future economic activity, copper has hit all-time highs. What are the forces at play and strategies to benefit from the electric metal’s strength?


Baby bust: will infertility shape Australia's future?

In 1961, Australian women had 3.5 children on average but by 2018, this figure stood at just 1.7. Falling fertility creates a shift in demographics and the ratio of retirees to working-age people.

SMSF strategies

The Ultimate SMSF EOFY Checklist 2021

The end of FY2021 means rules and regulations to check for members of public super funds and SMSFs. Take advantage of opportunities but also avoid a knock on the door. Here are 25 items to check.


How long will the bad inflation news last?

The answer to whether the US inflation increase will prove temporary or permanent depends on the rates of growth of the quantity of money. It needs to be brought down to about 0.3% a month, and that's a problem.


The ‘cosmic’ forces leading the US to Modern Monetary Theory

If the world’s largest economy adopted a true MMT framework, the investment implications would be enormous. Economic growth would be materially greater but inflation and interest rates would also be much higher.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.