Self-managed super funds have embraced market volatility, buying stocks during highly volatile periods on markets in 2016. This included the Brexit vote in June, the August bear market and the US election in November. They were also the largest net investors in the top 20 ASX stocks over the year.
An analysis of CommSec’s clients found SMSFs traded 30 per cent more than other investors in retail-sector stocks. They are also more inclined to trade when markets are volatile.
From a sector perspective, bank stocks are the most popular equities in SMSFs, comprising more than 32 per cent of all their assets. Shares in the Materials, Telecommunication Services, Diversified Financials and Food and Staples sectors are also popular with these investors.
The analysis showed banks make up almost 25 per cent of all trades, by value, for SMSFs. This compares with 18 per cent for other investors. Also, Materials and Energy together made up 25 per cent of trades, by value, for SMSFs. This number is 35 per cent for other investors.
SMSFs are also showing more appetite for mid- to small-cap market assets.
Other findings from the research include that while SMSF trading volumes last year were in line with volumes encountered in 2015, there was a trend towards smaller deal sizes.
The Self-Managed Super Fund Association’s chief executive, Andrea Slattery, said the findings indicate volatility translates into people being well-advised and taking advantage of opportunities. “It means they are really engaged in their investments, portfolio and planning,” Slattery said.
The research also indicated that SMSFs’ average voluntary contributions dropped in the September quarter, from $10,750 to $3040. Slattery attributes this to investor uncertainty prior to the federal government announcing, but not yet legislating, lower super contribution caps during the three months.
“In the next six months, there will be higher inflows, as people become more involved in taking advantage of the current superannuation contribution caps,” she predicted.
She said the fact SMSF members are substantial investors in sectors such as banks and telcos shows they want both yield and capital growth, adding that this echoes previous research the SMSF Association has conducted.
“They’re flexible in the way they go about it and they’re very unlikely to divest; their plans are long-term,” Slattery said.
It’s a positive message for the advice community that confirms people become more engaged in their investments when they are taking advantage of opportunities in the market.
“What we need, as an advice community, is to be competent and provide services to meet their needs,” said Slattery. SMSF advisers require accreditation to provide fund members with competent, valuable services and advice, she explained.
“Our research shows SMSF members are looking for advisers who know they are getting somebody who knows what they are talking about and has gone those extra yards,” she adds.
