SMSFs are chasing value

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Categories: Empowering you

Self-managed super funds (SMSFs) are increasingly on the hunt for value when it comes to their Australian share portfolios, a new CommSec report has found. 

The September 2018 CommSec SMSF Trading Trends report1, which analyses the period from 1 January 2018 to 30 June 2018, says SMSFs are taking advantage of share price weakness to buy into blue-chip stocks.

The buy percentage of the total trading value dropped from 51.7% to 50.7% among SMSFs, while increasing from 50.0% to 51.1% among other investors.

SMSF investors have also been actively selling stocks that have had strong gains over the past 12 months, suggesting that many view them as fully valued, the report notes.

SMSFs are continuing to look beyond the ASX20 for opportunities, particularly among mid and small cap companies. Minerals and Galaxy Resources.

While the average number of stocks held by SMSFs dropped slightly from 12 to 11.9 stocks, SMSFs remain considerably more diversified than other investors, according to the report. The average number of stocks held by non-SMSF investors fell from 5.0 to 4.9 during the same period.

ASX20 shares now account for just 33% of the total value of shares traded by SMSFs, down from 40% a year ago. However, SMSFs are still more likely to trade ASX20 shares than other investors, with ASX20 stocks accounting for only 29% of trades by value performed by non-SMSF investors.

The latest research is showing a trend by SMSFs to improve diversification in their portfolios, says Marcus Evans, CommSec’s Head of SMSF Customers.

Interest in overseas markets

Not only has the focus begun to move away from the blue-chip stocks but there’s evidence of a greater interest in international markets.

“SMSFs aiming to improve their performance understand that they need to be better diversified. So they’re using different tools like Exchange Traded Funds (ETFs), listed investment companies (LICs) and even direct shares to get international exposure,” he says.

“We’re also seeing more interest in fixed interest funds, currency, and international property and infrastructure as well.”

ETFs are a particularly popular way of obtaining international exposure.

“SMSFs were early adopters of ETFs but, in the beginning, they were buying ETFs based on the Australian market. What we’re seeing now is they’re selling down their domestic and putting that money towards international ETFs,” says Evans.

ETF holdings among SMSFs have increased by 8% in the past six months, the CommSec report found. The number of SMSFs including ETFs in their portfolios increased by 5.8% in that period.

At the same time, value-conscious SMSF investors have also been taking profits, with the ETF buy/sell ratio falling from 66/34 to 56/44.

Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only.