According to the latest finding by the Multiport SMSF Investment Patterns Survey, self-managed super fund (SMSF) investors have reduced their cash holdings in favour of seeking out higher returns in international equities.
The survey found that SMSF allocations to cash have reached a record low level of 18.3%. Importantly, the survey also found that the outflow from cash was countered by a flow into the international property and equity sectors.
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It would appear that investors have become fed-up with the paltry returns being offered by bonds and term deposits and been tempted by the strong showing of global equity markets.
The survey also noted that SMSFs were not inclined to invest directly in international equities, preferring instead to invest via managed funds. This trend should be particularly beneficial for domestically-based globally-focused fund managers with track records of solid investment performance such as Platinum Asset Management Limited (ASX: PTM) and Magellan Financial Group Ltd (ASX: MFG).
Firstly, the rise of platforms and other vehicles such as the ASX’s mFunds product has made gaining exposure to international equities easier than ever for SMSF investors. Given the relative size of global equity markets and the higher economic growth rates of developing regions, Australian investors risk missing out on higher returns if they remain 100% invested in cash and domestic assets. SMSF investors who don’t run an adequately diversified portfolio should perhaps consider following the lead of other investors who are increasing their allocation to global assets.
Secondly, as more and more investors become aware of the benefits of diversifying their portfolio to include international equity exposure, listed fund managers such as those mentioned above and AMP Limited (ASX: AMP) are well placed to benefit. Investors looking for a positive thematic investment opportunity could be well served by owning fund managers that offer global equity products to SMSF investors.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
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