SMSF high equity allocation a worry

Self-managed super funds' (SMSF) investments showed high equity concentration risks at the end of the June quarter, which means many retirees are susceptible to a share market downturn, risk profiler FinaMetrica said.

Co-founder Paul Resnik said many SMSFs cannot grasp the importance of international diversification and so do not invest offshore properly.

He also said they do not understand exchange traded funds, and have little regard for managed funds, so they invest directly in Australia since they are familiar with it.

"In addition, SMSF investors seem to be taking on more investment risk than they might naturally accept if they invested consistently with their risk tolerances," Resnik said.

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"Taking into account the Australian tax and social security systems, and often large SMSF account balances, they may also be taking on more risk than needed to achieve their goals."

Australian Taxation Office data showed SMSFs invested $177.6 billion in listed Australian shares at the end of the June quarter, up from $174.8 billion in the March quarter.

Listed Australian shares made up 32 per cent of all SMSF assets in the June quarter at $557.1 billion, up from $548.1 billion in the March quarter this year.

Cash investments increased to a record $157.9 billion, while SMSFs invested just $2.3 billion in international shares.

"There are three areas that SMSF trustees, advisers and members need to think carefully about: their over exposure to Australian assets which could be much higher than 90 per cent of total assets; their under exposure to professional investment management, which might be as low as 20 per cent; and their overall exposure to risky growth assets, typically at around 70 per cent, which is likely to be more than they need to take to meet their financial goals," Resnik said.