SMSF trustees have growing concerns on the impact of regulation.

Self-managed superannuation fund (SMSF) trustees have growing concerns on the impact of regulation and ongoing global volatility on their retirement plans with a growing number increasing cash reserves, according to AMP Capital.

Findings from annual research undertaken by AMP Capital show that more than two-thirds (65 per cent) of SMSF trustees are keeping cash in reserve due to global volatility concerns. On average, $110,000 in cash per SMSF is being held that would otherwise be invested in growth assets.

In addition, the majority (70 per cent) of SMSF trustees said they are concerned by ongoing regulatory reform to superannuation with 47 per cent of trustees planning to seek advice on how to navigate through the changes.

AMP Capital Global Head of Marketing, Digital, Innovation and Direct Tim Keegan said: “Regulatory changes to superannuation and global market volatility continue to be a concern for SMSF trustees. As a result, many investors are increasing the amount of money held in cash as a risk-reducing strategy. However, with a heavy weighting to cash, trustees could be at risk of not meeting their retirement goals.”

AMP Capital runs an in-depth survey with SMSF trustees each year to provide a snapshot of trustee investment trends. It also helps to arm financial advisers with insight and knowledge of where SMSF trustees are looking for specific advice.

While the number of SMSF trustees seeking advice increased 6 per cent in 2017, the majority (63 per cent) of trustees are still open to receiving further advice. Developing a retirement strategy (according to 30 per cent of trustees), income generation (28 per cent) and investment selection (22 per cent) are the top areas trustees are looking for advice.

Mr Keegan said: “In a period of heightened regulatory change, it’s clear that many SMSF trustees are looking for help to set up the right portfolio to reduce risk while still supporting their retirement goals. It’s an opportunity for advisers to share their expertise with new and existing SMSF clients.”

The research also revealed SMSF trustee perceptions of diversification. Close to half (47 per cent) of trustees consider a portfolio with 20 individual equity stocks to be well diversified and more than half (53 per cent) say a portfolio with a mix of domestic and global equities is well diversified. However, only 35 per cent of trustees feel that a portfolio invested across four different asset classes is diversified.

Mr Keegan commented: “The research reveals a potential concentration risk in equities for SMSF trustees. It’s important to not only consider diversification in the equities held but also across different asset classes, including infrastructure and property for example.

“The research showed 22 per cent of trustees intend to invest in managed funds over the next 12 months, with one of the main reasons to increase portfolio diversification.  There’s an opportunity for advisers to discuss appropriate unlisted managed funds and active exchange traded funds available in the market to support trustees achieve this objective,” he said.

The research, now in its fourth year, is based on a quantitative online survey of nearly 700 AMP Capital SMSF investors conducted by Investment Trends to uncover the latest SMSF investor trends and insights.

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Tim Keegan

Self-managed superannuation fund (SMSF) trustees have high growth expectations for the next 12 months yet as many as 55 per cent have moved to a more defensive asset allocation amid continuing market volatility, according to AMP Capital.

Statistics from AMP Capital’s latest Black Sky Report show that while SMSF trustees expect a 10.9 per cent return on their portfolio this year (6 per cent capital and 4.9 per cent income), only 18 per cent of trustees have made changes to position their portfolio for growth. This is, however, an increase of five percentage points from 2015.

Further to this, nearly half of SMSF trustees surveyed for the report say their aim is to have a fully diversified portfolio yet more than 50 per cent of their portfolio is invested in just one investment type outside of managed funds.

AMP Capital Head of Self-Directed Wealth and SMSF Tim Keegan said: “If trustees continue to be exposed to significant portfolio concentration risk and remain in more defensive assets without seeking financial advice, they may struggle to achieve their retirement goals.”

AMP Capital’s Black Sky Report is developed each year to provide a snapshot of trustee investment trends. It also helps to arm financial advisers with insight and knowledge of where SMSF trustees are looking for specific advice.

The 2017 report has identified the biggest investment challenges for SMSF trustees as market volatility (according to 18 per cent of trustees surveyed), investment selection (11 per cent) and regulatory changes (10 per cent).

Mr Keegan said: “It’s clear that many SMSF trustees need help especially around portfolio construction and understanding the regulatory changes that are coming into play. With nearly 60 per cent of SMSF trustees remaining open to using the expertise of a financial adviser, it’s clear this is a huge opportunity for advisers to tap into.”

The research also revealed that SMSF trustees continue to find managed funds attractive, with 47 per cent each investing approximately $280,000 in them. Thirty per cent of SMSF trustees made their most recent managed fund investment after receiving advice from their financial planner.

Mr Keegan said: “There is an increasing appetite among SMSF trustees to invest in Australian equity funds, both active and passive. Advisers can be proactive in recommending high-quality unlisted managed funds as well as introducing trustees to the increasing range of active exchange traded funds that are now available on the market.”

Active ETFs replicate managed fund strategies but are able to be bought and sold during the trading day like any share on the Australian Securities Exchange. AMP Capital, in alliance with BetaShares, launched three active ETFs during 2016: the AMP Capital Dynamic Markets Fund, the AMP Capital Global Property Securities Fund and the AMP Capital Global Infrastructure Securities Fund.

According to Mr Keegan: “With expectations for growth at an all-time high, regulatory uncertainty at its peak and new products such as active ETFs becoming increasingly popular, there is more need than ever for SMSF investors to turn to financial advisers for support.”

For the third year in a row, AMP Capital has released the Black Sky Report, which uses research and data from leading research house Investment Trends to uncover the latest SMSF investor trends and insights.

The research is based on a quantitative online survey of nearly 800 AMP Capital SMSF investors conducted by Investment Trends. The 2017 Black Sky Report can be downloaded at: http://www.ampcapital.com.au/smsf-suite/blacksky

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Tim Keegan

Infrastructure is growing in popularity among retail investors including self-managed super fund (SMSF) trustees as evidenced by the approximately 300 people who attended yesterday’s AMP Capital webinar on the asset class.

The webinar, hosted by AMP Capital Core Infrastructure Fund Manager John Julian and AMP Capital Head of SMSF and Self-Directed Wealth Tim Keegan, covered the key characteristics of the asset class and what it can offer SMSF investors in particular.

Mr Keegan said: “Each year, we’re seeing more retail investors and financial advisers wanting to know more about infrastructure. AMP Capital has found that as investors become more educated on infrastructure’s role in a diversified portfolio, flows into infrastructure managed funds are rising. SMSF trustees in particular want access to investments they can’t do themselves and infrastructure falls into that category, particularly for those looking for a defensive play. At today’s webinar, participants were particularly interested in the different ways to access infrastructure, investment performance, the impact of rising interest rates on infrastructure assets and gearing.”

Mr Julian noted: “Infrastructure offers a range of investment characteristics that can be particularly attractive in the low interest rate and volatile market conditions we have seen in recent times. Our clients tell us they like its attractive, consistent returns and yield; defensive characteristics; and diversification benefits. Infrastructure is also becoming more accessible to retail investors. In the past, high qualityunlisted infrastructure assets were usually only available to large institutional investors but now mums and dads can own their own piece of Melbourne Airport or UK rolling stock company Angel Trains.”

Following the webinar, AMP Capital identified its top five reasons why retail investors should consider infrastructure.

1) Attractive, consistent returns

Infrastructure offers the potential for attractive, consistent returns through market cycles. This is because infrastructure assets are often essential to the day-to-day operation of our society such as the provision of water or electricity and gas. Due to the nature of the essential services they provide, these types of assets are often less influenced by economic factors than many other businesses. In addition, infrastructure assets often enjoy the protection of monopolies, or operate in markets where the barriers to entry are high, meaning they are often free from the competitive pressures faced by many more traditional companies.

2) It can help investors meet their income goals

Infrastructure assets can provide consistent, long-term income yields because their revenues are often underpinned by regulation or by long-term contracts with highly creditworthy counterparties (which can often include governments). Consequently, infrastructure assets may offer a high level of security with regards their future revenues. Infrastructure asset revenues are also often linked to inflation, which can help investors protect against erosion of the value of their investment by inflation over time.

3) It’s a defensive play

Infrastructure generally, and unlisted infrastructure particularly, can play an important role for long-term investors due to the stability it can provide within a diversified investment portfolio and the visibility of the income streams it generates. In a low interest rate environment where the outlook for total return appears compressed, asset classes that exhibit defensive characteristics with an attractive and stable income profile are obvious candidates for a long-term investment strategy.

4) The world needs more and updated infrastructure

Infrastructure is an investment thematic that will continue to play out because the need for infrastructure is a never-ending cycle. Growing populations need to be supported by additional infrastructure while ageing infrastructure needs to be periodically upgraded or replaced. Investment in infrastructure helps stimulate sustainable, long-term economic growth, which then creates a further need for infrastructure. Ultimately,infrastructure promotes higher living standards as it fosters economic growth and creates jobs. A McKinsey report estimates that US$57 trillion of global investment in infrastructure will be required by 2030.

5) Active management of infrastructure assets

AMP Capital has an active asset management philosophy when it comes to the management of the unlisted infrastructure assets it invests in. AMP Capital employs asset managers who have had extensive senior level industry experience. In addition, AMP Capital seeks to ensure that the overall stake under its control is sufficient to allow for significant influence over the future direction of the business. This would typically involve representation on the boards of the businesses. AMP Capital has a high level of involvement in these businesses, with a view to driving returns and managing risk for the benefit of investors.

SMSF trustees can invest in the AMP Capital Core Infrastructure Fund through the AMP Capital SMSF Suite with a minimum investment of $10,000. The AMP Capital Core Infrastructure Fund offers retail investors access to unlisted infrastructure assets usually only available to large institutional investors. It invests in a diversified global portfolio of unlisted infrastructure assets and listed infrastructure securities.

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Tim Keegan

AMP Capital has bolstered its SMSF Suite with the addition of the Core Infrastructure Fund following growing interest from self-managed super fund (SMSF) trustees in the infrastructure asset class.

The AMP Capital Core Infrastructure Fund offers retail investors access to direct infrastructure assets usually only available to large institutional investors. It invests in a targeted 50-50 mix of direct infrastructure and listed infrastructure securities, the latter to provide investors with liquidity. Through the AMP Capital Core Infrastructure Fund, SMSF trustees can own high quality direct assets such as Melbourne Airport in Australia and Angel Trains in the UK.

SMSF trustees can invest in the AMP Capital Core Infrastructure Fund through the SMSF Suite with a minimum investment of $10,000.

AMP Capital Head of SMSF Tim Keegan said: “Infrastructure is a growing investment trend for our SMSF customers, particularly those who are looking for defensive assets to add to their portfolio. We’ve listened to what our trustees want and I’m pleased to be able to offer them the AMP Capital Core Infrastructure Fund through the SMSF Suite. The suite is designed to provide trustees with the types of unique opportunities that are usually only the preserve of institutional investors.”

AMP Capital Core Infrastructure Fund Portfolio Manager John Julian said: “The need for infrastructure investment is a never-ending cycle. Investment in infrastructure helps stimulate sustainable, long-term economic growth, which then creates a further need for infrastructure.

“Our fund takes advantage of this need and aims to provide investors with both sustainable income and capital growth over the long term. It targets investments that can deliver predictable cash flows through economic cycles and this has resulted in consistent returns in good times and bad.”

During the five years to 31 December, the AMP Capital Core Infrastructure Fund outperformed its benchmark and delivered a return of 11.3 per cent per annum (including a cash yield of 6.6 per cent p.a.). During the same period, comparing the fund to the S&P/ASX 200 Accumulation Index, the Core Infrastructure Fund delivered 162 per cent of the return of Australian equities with only 40 per cent of the volatility.

The SMSF Suite was launched in May 2014 and also includes the Wholesale Australian Property Fund, the Corporate Bond Fund, the Global Infrastructure Securities Fund and the Dynamic Markets Fund.

SMSF trustees can also access the AMP Capital China Growth Fund, which is offered as an Opportunity for trustees through the suite.

The number of visitors accessing AMP Capital’s SMSF Suite has grown tenfold during the last 12 months due to the increased amount of educational content on the site and a new online application process for trustees who want to invest in AMP Capital funds. It replaces a complex, paper-based application process, allowing trustees to verify their ID online and invest in multiple funds at the same time.

Mr Keegan added: “Whether trustees are seeking diversification, capital preservation or better returns, our SMSF Suite offers them investments they may have considered out of their reach from commercial property to corporate bonds and now two different ways to gain exposure to global infrastructure.”

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Tim Keegan

Self-managed super fund (SMSF) trustees find choosing what to invest in the hardest aspect of running their own fund, according to new research by AMP Capital.

Twenty-seven per cent of trustees surveyed by Investment Trends for the research said investment selection was their most difficult task followed by keeping track of changes to SMSF rules and regulations (24 per cent), paperwork and administration (23 per cent) and finding time to research investments (19 per cent).

The vast majority of trustees (76 per cent), however, had made at least one new investment for their SMSF during the last 12 months, while 35 per cent had made between two and five investment changes and 16 per cent had made between six and ten changes.

Thirty-eight per cent of respondents had made a substantial shift in their SMSF’s asset allocation during the same period. Of that number, 24 per cent adopted a more defensive stance, 24 per cent increased diversification, 23 per cent changed their asset allocation because of their positive outlook on Australian shares while 22 per cent wanted their fund to focus more on income.

AMP Capital Head of Self-Directed Wealth and SMSF Tim Keegan said: “More than half the respondents to our survey said they set up an SMSF because they wanted more control of their investments and yet they identify investment selection as their most daunting task. It is also a task they largely do on their own: 44 per cent stated they make all the investment decisions for their fund, 23 per cent said decisions are made together with another member and 17 per cent make joint decisions with their financial adviser.

“The research again highlights the opportunities for financial advisers in the SMSF space. There is a segment of trustees who want advice, particularly in relation to finding the right mix of investments in order to meet their goals. The research also found they would like advice on pension and investment strategies, inheritance and estate planning. Based on this research, we’ve produced a guide for advisers entitled Black sky report: the SMSF opportunity for financial advisers, which contains insights to help them capitalise on the potential of this part of the market.”

In other findings, trustees reported that long-term aspirational goals drove most of their investment decisions (41 per cent) ahead of a need to fund additional personal goals (39 per cent) and to meet day-to-day living expenses (37 per cent).

If they felt their goals weren’t being met, 48 per cent of trustees said they would change the mix of investments while 27 per cent would seek advice from a financial adviser.

Mr Keegan added: “As a fund manager, AMP Capital was also interested to see that portfolio diversification was the main reason why trustees intend to invest in managed funds. They are seeking international diversification, access to different investment strategies and access to investments otherwise out of reach. International equities was the most popular managed fund in terms of where trustees are likely to put their money during the next 12 months.

“The Australian Securities Exchange’s mFund Settlement Service is a way for trustees to invest easily in managed funds; AMP Capital is a foundation member and last year we added six of our funds to the service. A sign of mFund’s potential among SMSF trustees is the fact 42 per cent of respondents would like to find out more about it and would be keen to use a service that allows them to purchase managed funds through an online broker, especially those related to actively-managed Australian and international equities.”

The research is based on a quantitative online survey of nearly 1,000 AMP and AMP Capital SMSF investors conducted by Investment Trends. Black sky report: the SMSF opportunity for financial advisers can be downloaded at: www.ampcapital.com.au/blacksky.

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Tim Humphreys

AMP Capital has made it easier for self-managed super fund (SMSF) investors to access listed infrastructure by adding its flagship global fund to the SMSF Suite.

The AMP Capital Global Listed Infrastructure Fund was established in July 2010 and the capability already has more than A$1 billion in assets under management from both institutional and retail investors.

The fund takes advantage of one of the biggest investment thematics globally: the need for both developed and emerging economies to increase their investment in infrastructure. This is driving strong performance in listed companies that are contributing to the infrastructure boom and, subsequently, the asset class.

AMP Capital Head of SMSF Tim Keegan said: “We have added the AMP Capital Global Listed Infrastructure Fund to the SMSF Suite because it can be difficult for SMSF investors to access the best opportunities in listed infrastructure on their own. Listed infrastructure is a relatively new asset class, which presents a lot of good growth opportunities particularly given our fund looks internationally for the best investments.”

AMP Capital Head of Global Listed Infrastructure Tim Humphreys said the fund only invests in what is considered ‘core and pure’ listed infrastructure assets such as water utilities, oil and gas pipelines, electricity transmission and distribution and transportation infrastructure such as airports, toll roads and seaports.

“We look for companies that deliver stable and predictable cash flows as this helps us deliver strong returns and downside protection to investors,” Mr Humphreys said. “SMSF investors can benefit from the diversification global listed infrastructure offers their portfolios while its high dividend yield will help them meet their income goals. It is also a low-risk way to access the growth potential of global equities.”

The SMSF Suite was launched in May with the AMP Capital Corporate Bond Fund and Wholesale Australian Property Fund. There has been a five-fold increase in flows to both funds since the launch of the suite.

Mr Keegan noted: “Through the SMSF Suite, we’re able to bring our customers unique investment opportunities they may not have otherwise considered or been able to access.

“SMSF trustees like the fact we’ve lowered the minimum investment for the Wholesale Australian Property Fund to $10,000 and they have also flocked to the Corporate Bond Fund, which is now the most popular AMP Capital fund among our SMSF clients.

“We’re looking forward to expanding the SMSF Suite next year to bring our customers additional investment options in equities, property and infrastructure.

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The AMP Capital Wholesale Australian Property Fund and the AMP Capital Corporate Bond Fund allow SMSF investors access to investment opportunities that may otherwise require a large capital outlay or significant acquisition costs.

The two funds will appeal to SMSF investors who would like to add diversity to their portfolios without having to directly invest in these asset classes.

The Wholesale Australian Property Fund provides exposure to Australian office, retail and industrial assets, and within the Corporate Bond Fund DIY investors are able to access a range of industries such as financials, utilities and telecommunication providers within the corporate bond market.

AMP Capital Head of SMSF Tim Keegan said desire for control of their investments coupled with higher average balances means SMSFs take a diverse and involved approach to how they manage their wealth.

“SMSF trustees are experienced and engaged investors looking for unique investment opportunities to help them grow their portfolios or generate steady income. Managed funds allow these investors to invest in sectors and assets that may be hard to access or cost prohibitive,” Mr Keegan said.

“We’ve recognised that SMSFs want better access to managed funds, including ease and accessibility of entry. We have reduced the minimum investment for the Wholesale Australian Property Fund to $10,000, while the Corporate Bond fund will suit investors whose goals aren’t being met through cash and term deposits.

“As a leading fund manager with a focus on providing investment solutions to meet specific needs, we will continue to build on these more specialist product offerings to meet the needs of the SMSF investor as the sector continues to grow.”

AMP has also developed a website to support the launch of the SMSF investment series. The website – www.ampcapital.com.au/smsf – will offer content specifically targeted to SMSF investors, including live market insights, industry commentary and technical support, with the aim of giving investors confidence they can achieve their retirement goals.

AMP is a leader in SMSF administration, offering a broad range of compliance and technical services for SMSF investors through AMP SMSF Solutions and Ascend, as well as though established brands such as Cavendish and Multiport. Through SMSF Advice, AMP also provides licensing options for accountants.

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