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Here’s how SMSFs are beating the RBA

It was the first Tuesday of the month again this week which meant it was time for the board of the Reserve Bank of Australia (RBA) to come together and make a decision on the official cash rate. Predictably, the RBA decided to once again hold rates at 2.5%.

The low rate is good news for borrowers but it’s a serious conundrum and hindrance for many self-funded retirees who are forced to climb higher up the risk curve – mainly into property and equities – in an attempt to seek out higher returns on their savings.

For many self-managed super funds (SMSFs) the need for income has led to high-yielding defensive stocks such as Telstra Corporation Ltd (ASX: TLS). The worry is that some retirees may not be adequately prepared for running their own portfolio and they could end up with too much company specific risk. Lack of diversification is a serious risk and more likely if an investor does not have a solid grasp of portfolio management.

This has led many SMSF investors to seek out professional advice. One area that has been popular recently has been the listed investment company (LIC) sector. LICs are effectively listed managed funds – there are some important differences– but the concept of outsourcing the management of your portfolio remains.

Recently, numerous fund managers have been floating LICs in response to heighted investor demand for these products; presumably SMSFs have been major buyers of these initial public offerings.

Here are three new LICs to watch.

It was recently announced that leading fund manager Perpetual Limited (ASX: PPT) is seeking to raise $600 for its first LIC. The company will be called Perpetual Equity with a mandate which will allow the portfolio to invest in global as well as ASX-listed stocks.

QV Equities Ltd (ASX: QVE) is a recent offering from fund manager Investors Mutual. Investors Mutual has a strong history of adding value for its clients making this LIC one worth watching.

Future Generation Investment Fund Ltd (ASX: FGX) boasts an impressive line-up of fund managers in what is effectively a fund-of-fund. The company listed in September and offers exposure to a range of leading fund managers across the spectrum of investment styles.

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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd.

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