Superannuation services provider Vanguard says there has been a "shift in asset allocations" among investors with self-managed superannuation funds (SMSFs) in 2024.
Vanguard says SMSF trustees have reduced their allocation to cash (from 22% to 18%) and direct shares (from 31% to 27%) and nearly doubled their allocation to exchange-traded funds (ETFs) (from 5% to 8%).
ASX shares, including ETFs, are the preferred assets of SMSF investors. ATO figures show that $271 billion was invested in shares out of a total of $933 billion in assets under management in the March quarter.
Cash and term deposits are the second favourite category among SMSFs, with $145 billion invested.
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Why are self-managed superannuation investors buying ETFs?
Vanguard said the increased allocation to ETFs was a trend among advised and non-advised SMSF investors. In fact, non-advised SMSFs accounted for the bulk of the increase.
This reflects general trends showing ASX investors are ploughing more money into ETFs as they learn more about them.
ETFs are a relatively new type of investment. They first traded on the New York Stock Exchange in 1993 and on the ASX in 2001.
Vanguard says new SMSF investors intend to contribute to the trend.
A survey of 2,200 SMSF trustees for its 2024 Investment Trends Self Managed Super Fund (SMSF) Report found nearly 60% of newly established SMSFs intend to invest in ETFs over the next 12 months.
Vanguard said there were three reasons why self-managed superannuation investors were turning to ETFs. They are easy diversification, exposure to specific overseas markets, and liquidity.
More Aussies setting up SMSFs to take control of investments
Vanguard says an increasing number of Australians are setting up SMSFs to take control of their superannuation savings.
Renae Smith, chief of Personal Investor at Vanguard Australia, said:
The sustained rebound in SMSF establishment rates reflects the growing interest and confidence among investors in managing their own superannuation funds and the autonomous nature of this cohort.
Their desire for control or choice over investment products or their fund's asset allocation far outweighs the time, effort and complexity required in managing their funds.
There were a net 7,099 SMSFs established in the March quarter, according to the ATO. This was the third-biggest quarterly increase over the past five years.
There are now 616,400 SMSFs in operation in Australia, with 1.15 million members. As we recently reported, the average wealth per SMSF member is $780,254.
The largest cohort of SMSF members is 75–84-year-olds (15.1% of members), followed by 60–64-year-olds (12.7%) and 65–69-year-olds (12.1%).
The superannuation preservation age is between 55 and 60 years, depending on when you were born.
