According to Vanguard, strong weightings towards shares and cash in self-managed super funds (SMSFs) may expose a need for greater asset diversification.
SMSFs managed over $880.5 billion in Australian and international assets at the end of 2022, a $20 billion increase compared to the previous quarter.
Data released earlier this month by the Australian Tax Office (ATO) revealed that Australia-listed shares and cash, in aggregate terms, were the top asset classes that SMSFs were investing in.
The two assets collectively represented over 44% of total SMSF assets, with listed shares valuing over $256 billion followed by cash and term deposits at $136.5 billion, as of 31 December 2022.
Unlisted trusts were the third most popular asset for SMSFs, with $113 billion of investing flowing towards this class.
Non-residential real property received over $87 billion from investors, which reflected SMSF trustees’ ability to own and occupy property through their SMSF.
Vanguard observed that the large holding in Australian shares highlighted a notable “home bias” by SMSF investors leaning towards equities.
The overweight allocation towards these assets indicated a possible reluctance towards higher-risk investments options, suggesting that “SMSFs may not be as diversified as perhaps they should be”.
Factors causing the higher allocation towards certain classes included tax benefits for investors, the ability to own commercial properties and keeping cash on hand for retirement withdrawals.
With the number of SMSFs exceeding 600,000 for the first time in the last quarter of 2022, more than 1.13 million people were managing their own retirement savings.
