SMSFs on track to lose $40b over six months on equities slump - Credit Suisse
Posted on: 30 Sep 2016

SMSFs on track to lose $40b over six months on equities slump - Credit Suisse

This article outlines the fact that SMSF's now make up 30% of market share of Australian superannuation. However, also pointing out that industry funds once again are the poor performers as opposed to SMSF's that contain property and cash as the bulk of the asset allocation.

Self-managed super funds have outperformed large funds despite a bias to residential property and cash.

Self-managed super funds are on track for their biggest losses since 2011 due to an overexposure to Australian equities, Credit Suisse says.

SMSFs lost $19 billion in the June quarter, according to the research, and are set to lose a further $21 billion in the September quarter.

Furthermore, they are starting to slip in market share. "Selfies" controlled 30 per cent of market share of Australian superannuation assets 12 months ago, a figure which has since declined to 29 per cent, or $590 billion.

That loss has "almost exclusively" been to industry funds, with retail funds holding steady.

"We believe much of the reason why selfies are losing market share is because of their relatively poor recent performance," said Credit Suisse.

Selfies had 40 per cent of their assets in Australian equities in June 2014 and little in international equities. By contrast, industry funds had 24 per cent in Australian equities and 26 per cent in global stocks.

This allocation was to prove unfortunate given the respective performance of global and Australian shares over the past year. Australian equities returned 6 per cent while global stocks piled on 23 per cent.

"The main reason why selfies have gone backwards over the last quarter is because of their investment losses in Australian equities," said Credit Suisse. "We calculate [selfies] suffered $19 billion of Australian equity capital losses in the June quarter which is equivalent to around 3 per cent of assets.

That was the biggest quarter of losses since September 2011, when they lost more than 5 per cent in Australian equities.

"The average selfies member would have endured a draw-down of about $18,000 in the June quarter and a further $20,000 in the current quarter - maybe enough to fund that extravagant safari in the Kalahari."

However, Credit Suisse said that selfies would "stand their ground, for now" and plough new funds into Australian equities.

One of the main reasons for this is history. Selfies demand for Australian equities had remained strong after previous losses, such as the global financial crisis and the Euro crisis of 2011-12.

Secondly, Australian equities offered good yields.

"Selfies buy what they know and Australian Tax Office data suggests they have a clear domestic bias. Perhaps this is appropriate given their liabilities are in Aussie dollars. Within Australia, there are not many assets that come close to providing the post-tax dividend yield on offer by the equity market.

"Our findings suggest selfies will be buyers of Aussie equities in the year ahead."

With regards to individual stocks, the four banks and Telstra would remain selfies' core holdings. Selfies would be weary of potential dividend cutters, which "may include ALS Services and Alumina".

Conversely, stocks that could produce good income included AGL Energy, Macquarie Group and