Did SMSFs really perform better on average?

Self-Managed Superannuation Funds (SMSFs) on average returned more than Australian Prudential Regulation Authority (APRA)-regulated funds, according to the latest analysis produced by the SMSF Association.

The analysis, derived from the Australian Taxation Office’s (ATO’s) 2016-17 statistical overview of the sector, attributed SMSFs with having made an average return of 10.2 per cent compared to the 9.1 per cent return for APRA-regulated funds.

The SMSF Association said this marked a strong continual run of positive returns for SMSFs and continued comparable performance for APRA-regulated funds.

“We believe this is quite a significant result for SMSFs, as differences in ATO and APRA investment return methodologies have typically seen SMSF investment returns understated compared to those for APRA funds,” the analysis said.

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It claimed that this understatement was “predominantly due to the differing datasets available to the ATO and APRA which limit the comparability of the investment returns reported by each”.

However, it noted that aligning the methodologies “may require the ATO to impose additional reporting burdens on SMSF trustees”.

“Furthermore, another significant issue in comparing investment returns, especially at a sector level, is that SMSFs have a significant proportion of members in retirement phase compared to APRA-regulated funds which can distort comparisons,” the analysis said. 

“The different costs that are included in SMSF ROA compared to APRA-regulated fund ROR also make it difficult to compare investment returns across the sector and come to a conclusion on what level of assets are required by SMSFs to achieve similar returns to APRA -regulated funds.”