SMSFs sitting on $11 billion war chest

The latest research from AMP Capital and Investment Trends shows this year’s market volatility has made little long term difference for many self managed super funds (SMSFs), with two thirds leaving their long term investment plans unchanged.

The AMP Capital/Investment Trends 2008 SMSF Investor Report* was compiled from over 2,500 surveys completed by SMSF trustees between May and July this year, making it the largest study to date of SMSF investors in Australia, and building on four years of prior research by the two organisations.

The report found that 66 per cent of SMSF investors said they were maintaining their long term investment strategy following the recent market volatility. For 25 per cent of respondents, the market conditions represented an opportunity to buy what they considered to be undervalued shares.

The report found that 46 per of SMSFs had only incurred paper losses as a result of this year’s market volatility, and had not sold the assets. The research was also significant for what it did not find:

• Only 8 per cent of respondents said they had realised significant losses on their SMSF;
• Only 7 per cent said they had recently invested significant new money into shares which had gone down; and
• Only 1 per cent said they would have to delay their retirement because of the losses incurred on their fund.

The study also found SMSFs were still holding a large amount of cash ‘left over’ from last year’s Simpler Super inflows. Fifty seven per cent still had recent contributions (last 12 months) held in cash because they hadn’t yet had time to choose investments, coupled with the subsequent market volatility. This represented a total of almost $11 billion in ‘excess’ cash held by SMSFs.

AMP Capital Investors Business Director of Client, Product & Marketing, Brian Delaney said: “Clearly there are a lot of SMSF investors who are waiting for market conditions to stabilise before investing their excess cash, but it’s significant to note that two thirds intend to keep their long term investment plans untouched.”

“The report also found that 49 per cent of SMSF investors are using a financial planner or specialist superannuation consultant to help with their investment decisions. By getting the right advice when establishing a long term strategy, investors are much more likely to stick with that plan through volatile market conditions,” Mr Delaney said.

The report found that 55 per cent of SMSF investors say they would like more assistance with running their fund. 19 per cent said they would like assistance with investment advice, while 12 per cent felt that the areas of rules, regulation and compliance were where they need the most help.

According to the Australian Prudential Regulation Authority (APRA), SMSF assets grew $29 billion (11 per cent) to $286.1 billion in the year to March 2008. APRA reports there were 387,656 SMSFs up to the period, a net increase of 40,672 (12 per cent).

 *2008 AMP Capital / Investment Trends SMSF Investor Report. This was the fourth annual Investor Report, and was based on a sample of 2,545 SMSF investors completed in July 2008.