APRA fund allocations no better than SMSFs

Some of the constant critics of Self Managed Superannuation Funds (SMSFs) are choosing to ignore some of the practices of Australian Prudential Regulation Authority-administered funds, according to SMSF Professionals Association Technical Director, Graeme Colley.

Colley pointed to recent criticism of SMSF trustees for being overweight in Australian equities, especially the fully franked blue chips such as the banks and Telstra.

"It wasn't so long ago these same critics were pointing their fingers at SMSFs for holding too much in cash and fixed deposits," he said.

Colley said the SMSF critics seemed to ignore the fact that some APRA-based funds allowed members to put all their money in the top 300 ASX stocks and some let you put it all in one asset class such as overseas shares.

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"What's worse, an APRA-based fund that lets you put all your money in one asset class or an SMSF that may be overweight in one asset class?" he asked.

"I can't speak for APRA-based funds, but in the case of SMSFs it might just be the case that an overweight allocation best suits the fund's risk profile," Colley said.

He said that if SMSFs were criticised for being too exposed to market risk then, APRA funds that were in the same boat would fall just as heavily and their members wouldn't even know what had happened as they were not engaged.

Colley said the critics typically entered the debate when there was a change in market sentiment and used this factor to assert that SMSFs had the wrong asset allocation.

"The difference is barely noticeable compared with what APRA funds allow their members to do without proper advice and assessment of risk profiles," he said. "What this ignores is that the APRA figures conclusively show that SMSFs, on average, outperform their APRA-regulated cousins when markets are struggling and match their performance when markets are rising."