Philip LaGreca

Cash balances decreased significantly during the last quarter of 2017 as trustees invested their cash holdings into the Australian and international equity sector, the latest SuperConcepts SMSF Investment Patterns Survey shows.

In the December 2017 quarter cash levels fell to a two year low from a peak of 19.8 per cent in June 2017 to 17.3 per cent in December, signalling a return to ‘normality’ following the introduction of the new super contribution rules.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca, said SMSFs saw large spikes in contributions in the first half of the year as trustees sought to make the most of the existing higher contribution cap allowances before the July 1 changes.

From 1 July 2017, the total value members can hold in existing tax-free pension accounts cannot exceed $1.6 million and new reduced contribution caps apply to member balances.

Mr La Greca said, “Equities were the big winner from the cash injection in the first half of the year as trustees chasing higher returns decided to invest in the last quarter.”

The allocation to Australian equities increased from 35.4 per cent to 36.9 per cent in Q4 and from 13.9 per cent to 14.2 per cent in international equities.

“Managed funds were increasingly used as a vehicle to invest in both domestic and international equities, as trustees look for new growth opportunities

“Investors who are time poor or lack confidence often turn towards specialised managed funds to help them pick a portfolio of small cap stocks or navigate the complexity of investing overseas.”

Managed funds now represent 19.6 per cent of total SMSF assets.

Contribution levels stabilised in terms of the long term relative patterns that existed prior to the announcement of the super reforms in 2016. The average contribution level for the quarter decreased from $3,838 to $3,611 per quarter in line with the expectations following the introduction of the new reduced non-concessional and concessional caps that apply since 1 July.

Looking ahead to the next quarter Mr la Greca said, “It will be interesting to see whether we see a spike in lump sum benefit payments as trustees implement lump sum withdrawal strategies to help stay under the $1.6 million pension transfer balance cap.”

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,670 funds, a sample of SMSFs SuperConcepts administers and the investments they held at 31 December 2017.  The assets of the funds surveyed represent approximately $3.2 billion.

Full report is available here.

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Philip LaGreca

SMSF trustees looking to take advantage of the current rules around non-concessional caps have significantly increased benefit payments, according to the latest SuperConcepts SMSF Investment  Patterns Survey.

In the March 2017 quarter the average benefit payment increased significantly from $16,256 to $27,900.

Overall contribution levels also continued to rise in Q1, increasing from $8,548 to $9,138.  This continues the trend established in Q4 of last year which saw contributions increase by 181  per cent following the Government’s confirmation that the proposed Super changes will come into effect on July  1, 2017. The rise, however, is a reversal of the historical trend where Q1 has always been the lowest quarter each year.

SuperConcepts Executive  Manager Technical & Strategic Solutions Phil La  Greca said the findings clearly demonstrated that SMSF  trustees were looking to maximise current non-concessional contribution rules.

The current $180,000 after-tax contributions cap, and the three-year  $540,000 bring-forward rule remain until 30  June 2017.

Commenting  on the new trend to emerge around benefit payments,  which almost doubled  mainly through the  increase in lump sum withdrawals,  Mr  La Greca said:

“Trustees are implementing withdraw and re-contribution strategies to take advantage of the window of opportunity before July 1. Strategies include making non-concessional contributions  into an accumulation account, starting  a new 100 per cent  tax free pension and making contributions to a  spouse to try  and  equalise member balances and  maximise access to the $1.6 million pension transfer  balance cap for both persons.”

During prior quarters the split of lump sum withdrawals versus pension payments tended to be around 20 per cent versus 80 per cent. In the first quarter of 2017 the split shifted to 40 per cent versus 60 per cent.

Asset allocations largely remained unchanged as SMSF trustees and their advisers focus on dealing with the opportunities around the upcoming changes.

The quarterly SuperConcepts SMSF Investment Patterns  Survey covers approximately 2,750 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group)  and the investments they held at 31 March 2016.  The assets of the funds surveyed represent approximately  $3.2 billion.

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Philip LaGreca

SMSF trustees looking to make the most of the current rules have significantly increased contributions, according to the latest SuperConcepts SMSF Investment Patterns Survey.

In the December 2016 quarter contribution levels almost tripled, increasing by 181 per cent from $3,040 in the September quarter to $8,550.

The rise in contributions follows the Government’s confirmation that the proposed Super changes will come into effect on July 1 2017.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca said the findings were not surprising and he anticipated contribution levels would continue to increase during the next two quarters due to the brief window of time to make large non-concessional contributions until 30 June 2017.

“The current non-concessional amounts apply for the remainder of this financial year and investors are taking advantage of the limited time available to them. We expect a continued uplift in the level of nonconcessional contributions in the lead up to July 1,” said Mr La Greca.

The current $180,000 after-tax contributions cap, and the three year $540,000 bring-forward rule remain until 30 June 2017.

Cash levels were also up in Q4 (from 18.1 per cent in the September quarter to 18.4 per cent in the December quarter).

Mr La Greca said it was likely the increased cash levels were related to the higher contribution levels being received.

The trend to invest through the use of exchange-traded funds (ETFs) continued to grow, with ETFs representing four per cent of all assets during the December quarter. ETFs were mostly used in the International Equity Sector, which represented 16.7 per cent of all international equity holdings.

The trend to use a limited recourse borrowing arrangement for property continued. The overall allocation to property loans increased to 81 per cent in the December quarter, up from 75 per cent the previous quarter. Meanwhile the number of financial asset loans decreased from 25 per cent to 19 per cent.

“The ATO’s safe harbour guidelines on related party loans explains the continued drop in the number of financial asset loans,” said Mr La Greca.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,800 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 December 2016. The assets of the funds surveyed represent approximately $3.2 billion.

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In the September 2016 quarter, the asset allocation to  the fixed interest sector increased from 12.2 per cent to 12.8 per cent. The growth  was mainly owing to the increased allocation to hybrid securities which rose  from 6.5 per cent to 7 per cent.

SuperConcepts Executive Manager Technical &  Strategic Solutions Phil La Greca said the continued low interest rate  environment was driving trustees to search for new income investments that  drive better returns.

“The continued drop in interest rates has given  trustees no choice but to seek income elsewhere. The new hybrid capital offer  from ANZ has led to increased interest in hybrids but investors are proceeding  with caution as the security generally carries significant risk,” said Mr La  Greca.

The trend to use a limited recourse borrowing  arrangement has seen the overall allocation to property loans increase by 7.4%  from 70.2 per cent to 75.3 per cent for the quarter. Meanwhile the number of  financial asset loans decreased by 16.9 per cent for the quarter.

“The ATO’s safe harbour guidelines around limited  recourse borrowing arrangements has led investors to wind up some of their related party loans in relation to financial assets and focus gearing on  property.”

At the end of the end of the September quarter 38 per  cent of all direct property holders had a gearing arrangement in place, up from 37.3 per cent the previous quarter.

Overall contribution levels to SMSFs in the September  quarter continued to decline with the average contribution inflow per fund $3,040, down from $10,750 the previous quarter.

“The continued decline in SMSF contributions this  quarter is likely to be due to speculation at the time on proposed  superannuation changes,” Mr La Greca said.

“However, following the government’s September  announcement around significant adjustments to proposed superannuation changes, we expect this trend to be reversed and contribution levels to start rising  again.

“With the current $180,000 after-tax contribution cap,  and the three year $540,000 bring-forward rule remaining until 30 June 2017, we’re likely to see a significant uplift in the level of after tax  contributions before the end of the financial year.”
The quarterly SuperConcepts SMSF Investment Patterns  Survey covers approximately 2,900 funds, a sample of SMSFs administered by  Multiport (part of the SuperConcepts group) and the investments they held at 30 September 2016.   The assets of the funds surveyed represent approximately $3.1 billion.

Click here to see the full survey.

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Philip LaGreca

SMSF trustees have diversified away from international and domestic equities, instead favouring property investments and opting to hold more in cash reserves, according to the SuperConcepts SMSF Investment Patterns Survey.

An analysis of SMSF investment trends across the 2016 financial year shows investments in Australian shares reduced from 37.1 to 34.5 per cent of portfolios, while international shares decreased from 14.1 to 13.1 per cent.

SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca said the continued volatile markets could be driving the more cautious approach SMSF trustees are adopting.

“Over the financial year, we’ve seen a large number of SMSF trustees diversify away from international and domestic equities. At the same time, there’s been an increasing number of investors moving into property and cash, suggesting they are looking to reduce their exposure to the stock market, which experienced periods of higher volatility during the period.

“Despite the reduction in equity investments, there remains an opportunity for SMSF trustees to further improve diversification with a large number of portfolios still heavily weighted in Australian shares, particularly the ASX top 20 stocks. The major banks were the most commonly held investments at 30 June 2016,” he said.

The move to more conservative asset classes saw cash holdings increase from 17 to 18 per cent of portfolios over the financial year, despite cash interest rates continuing to decline.

“We’ve seen trustees increase the amount of cash they have invested in short-term term deposits, climbing from 4.7 to 5.5 per cent over the year. With current interest rates on term deposits providing little returns, the move to cash could mean investors are feeling less confident in the stock market,” Mr La Greca said.

Property, both direct and listed, has continued to prove a popular investment for SMSF trustees, increasing from 18.3 per cent of investments to 21.7 per cent at the end of the financial year.

Proposed changes to superannuation has appeared to impact confidence with a significant reduction in average contributions to an SMSF, dropping 38 per cent from the June quarter in 2015 to the June quarter in 2016.

“Average contributions to SMSFs declined over the financial year, particularly in the December, March and June quarters compared to previous corresponding periods, a likely result of the uncertainty around potential superannuation changes before the May budget. Contributions declined from $17,320 in June quarter 2015 to $10,748 in June quarter 2016,” Mr La Greca said.

The SuperConcepts SMSF Investment Patterns Survey covers approximately 3,300 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 30 June 2016. The assets of the funds surveyed represent approximately $3.1 billion.

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Philip LaGreca

SMSF trustees have continued to reduce their exposure to the ASX’s top 10 stocks by market capitalisation as they maintain their search for greater yield and capital growth, according to the SuperConcepts SMSF Investment Patterns Survey.

In the March 2016 quarter, investments in the ASX’s top 10 shares by market capitalisation were significantly reduced from 20 per cent of fund assets invested in 2015 to 14 per cent at 31 March 2016.

SuperConcepts Executive Manager Technical & Strategic Solutions, Phil La Greca said the continued volatile markets are driving trustees to search for investments that drive better returns.

“We’ve seen a significant amount of SMSF trustees diversify away from Australia’s largest stocks. However rather than investing in different asset classes, we’re seeing a trend where trustees are investing in mid and small cap stocks on the ASX.

“It has been an effective strategy with the strong performance of smaller companies on the ASX helping to drive better returns than the index for SMSF trustees,” he said.

The trend to invest in other stocks on the ASX has seen the overall allocation to Australian shares increase marginally from 35.4 per cent to 35.8 per cent over the quarter.

“While many trustees have benefited from this approach, there still remains an opportunity to further improve diversification with SMSF trustees continuing to be heavily weighted in domestic equities,” Mr La Greca said.

During the March 2016 quarter, investments in international equities decreased slightly from 12.9 to 12.6 per cent while funds invested in fixed interest remained steady at 12.3 per cent. Investments in cash increased 0.4 percentage points during the quarter, now representing 18.4 per cent of all assets held.

“Over the past two years we’ve seen the amount invested in cash continue to increase with many trustees deciding not to renew term deposits in the current low interest rate environment,” Mr La Greca said.

Contribution levels to SMSFs in the March quarter were at the lowest level in two years with the average contribution inflow per fund $5,426, down from $6,393 the previous quarter.

“While we typically see a decline in SMSF contributions during the March quarter, this year has been particularly low. This could be a result of concern about speculation on proposed superannuation changes which was top of mind for many trustees during the quarter,” Mr La Greca said.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,900 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 March 2016. The assets of the funds surveyed represent approximately $3.1 billion.

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