Self-managed super funds (SMSFs) are missing out on booming sectors as they lack diversification through overseas assets, Invast Australia believes.
The global brokerage company said SMSFs allocated record amounts into Australian cash investments in the June quarter with 27 per cent of all SMSF investments in cash.
Invast Australia’s investment committee chairman, Gavin White, said there is a huge home investment bias with the potential risks if local share market corrects more than those offshore.
“SMSF portfolios often lack any basic degree of diversification into overseas assets given their huge concentration on Australian equity and cash investments… Investors are missing out on often superior returns offered by offshore financial markets, with the S&P/ASX200 well underperforming the US stock market, and underperforming most European markets over the past year,” he said.
“SMSFs are missing out on booming sectors, such as the all-important healthcare and technology industries, for example, which aren’t well represented in the ASX/S&P200, while they have overdosed on bank and resources shares.”
White said the second problem with not diversifying offshore is that SMSF investors are missing out on currency depreciation benefits.
“If SMSFs have offshore investments denominated in offshore currencies such as the US dollar, to the extent that the Australian dollar falls, investors will gain some returns back on their unhedged international investments, which works to offset losses on their Australian investments if the local share market falls,” he said.
