SMSF assets up 70% since 2009

Australians flock to set up their own self-managed super funds (SMSFs).

Industry funds are the biggest losers in the race to keep their most lucrative members, as Australians with the most retirement savings flock to set up their own self-managed super funds (SMSFs).

Around 38 per cent of Australians who set up SMSFs did so by switching from industry funds, according to new research from the Financial Services Council and UBS.

Retail super funds such as those offered by Australia’s big four banks are not spared the exodus of rich members, with around 30 per cent of people establishing SMSFs making the switch from retail offerings.

“When people do become engaged with their super, they may find that they don’t have the flexibility and control that they want in a retail or industry fund, and that’s why they move,” said Bryce Doherty, head of UBS Global Asset Management in Australia.

SMSFs remain the fastest-growing segment of the market.

The research into the $560 billion SMSF sector comes as financial services groups ramp up their efforts to stem the outflow of funds as older Australians leave to set up their own retirement savings vehicles.

Industry funds such as the $13 billion VicSuper are introducing new products such as Challenger’s annuities to meet the income needs of their rapidly ageing member base and to offer more strategies that might tempt members to stay with them.

The assets of SMSFs have grown by more than 70 per cent

The assets of SMSFs have grown by more than 70 per cent from $316.5 billion to $547 billion in just five years. Since 2009, the number of SMSFs has grown by around 30 per cent to 528,701 at the end of March.

“The research shows that SMSF members want control and transparency over their investments, so how these products are offered through vehicles such as ETFs [exchange traded funds] or other types of direct investments will be a key differentiator,” Mr Doherty said.

Cash remains king among SMSF trustees, with 35 per cent of holdings in the asset class.

Australian equities make up nearly a quarter of their assets, and many have zero exposure to global investments such as international equities or infrastructure.

Only around 7 per cent of SMSF holdings are exposed to direct residential property.

Typically, the lower the balance of the SMSF, the higher shares, cash and term deposits are in the investment mix, the research found.

Despite the low exposure to international assets, SMSF owners are increasingly recognising the need to diversify offshore, according to UBS. International shares appear to be the asset of choice as they look to ramp up their returns from offshore assets.