The growth in assets in Self Managed Super Funds (SMSFs) continues unabated with the SMSF sector now comprising nearly AUD500 billion in assets from just under 500,000 funds; each fund containing an average of around AUD1 million. The sector now represents almost one third of the total superannuation assets held in Australia; a number that continues to surprise (and worry) government and regulators.
The reasons this phenomenal growth rate has changed little over time is due to the desire by individuals to have control of their retirement assets, the continued search for cost savings and the disappointment many consumers feel with the cost and performance of managed fund options offered by investment managers in Australia.
The onset of and fallout from the GFC continues to provide additional encouragement for investors to examine the SMSF option with the numbers of SMSFs rising from 375,000 in June 2008 to 478,000 in June 2012, a whopping 30% increase.
During this same period, the amount of SMSF assets invested in listed trusts, unlisted trusts and managed funds went from AUD71 billion in June 2008 to AUD77 billion in June 2012. However, this represented a fall in the share of total SMSF assets held in listed and unlisted managed funds from 22.75% in June 2008 to 17.2% in June 2012. Most of this lost market share has ended up in cash or term deposits which have increased from AUD81.8 billion or 26.1% of total SMSF assets in June 2008, to AUD134 billion or 30% of total SMSF assets in June 2012.
Whichever way you look at the numbers, professional fund managers have not been able to continue to attract the same level of support from the SMSF sector since the onset of the GFC. They have lost out significantly to cash and term deposit products offered by the banks which are now the largest single investment class favoured by SMSF trustees. The cause of this drift away from managed funds can not just be attributed to investors losing faith in underwhelming sharemarkets. During the period June 2008 to June 2012, SMSF trustees took the total amount invested in listed shares from AUD 122billion to AUD131 billion.
However, the tide may be turning for professional fund managers as there are signs emerging that they have begun to fight back with many managed fund products being specifically targeted at SMSFs, backed by significant marketing and advertising campaigns. This market fight back by fund managers comes at the same time large superannuation funds report better investment performance and interest rates on cash and term deposits continue to decline. At some point in the near future, the offerings from the fund managers will start to look more attractive when compared with the returns available from cash and term deposits from the banks.
If SMSF trustees do start switching out of low yielding cash and term deposits and come back to local managed funds, an asset allocation of something approaching the 22% number which SMSF's maintained in 2008 would see an extra AUD40 billion heading towards managed funds in the near future.