Large APRA regulated superannuation funds have a particularly strong motivation for including Exchange Traded Funds (ETFs) in their member-direct investment options.
Member direct options are largely intended to stem the flow of members with big balances to self-managed superannuation funds, the earliest and strongest supporters of Australian listed ETFs.
In short, no investment option designed as an alternative to self-managed superannuation would seem complete without ETFs.
SMSFs often use a range of low-cost index ETFs covering at least the main asset classes to provide a diversified core to their portfolios, and then use ‘satellites’ of favoured actively-managed funds and direct shares. It is, of course, possible to follow a core-satellite approach using the member-direct options of large super funds.
The impact of SMSFs on the surging popularity of ETFs would be difficult to underestimate. According to Vanguard/Investment Trends, SMSFs made up 90,000 or 41 per cent of 220,000 investors holding Australian-listed ETFs in March this year.
Up until five years ago, SMSFs had made up at least half of the investors in Australian listed ETFs, a percentage that has been reducing as the products have become more mainstream.