SMSFs look offshore for diversification

Self-managed superannuation funds (SMSFs) have kept an eye on offshore investments this year, with the latest CommSec SMSF Trading Trends Report finding they increased their international share trades by 30 per cent in the first half of 2018.

The report also showed an increase in investing in exchange-traded funds (ETFs) with an international focus, with a desire for diversification through offshore property and currency, combined with rising asset values, seeing an eight per cent growth in SMSF holdings in ETFs.

This included investing in ETFs only available on foreign exchanges.

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Diversification was further evident in SMSFs’ increased use of listed investment companies (LICs) and listed investment trusts (LITs) to gain exposure to new asset markets. The value of international LIC and LIT trades by SMSFs had risen three percentage points over the first half of 2018.

“This trend to add international shares is strong among SMSFs who often use a core portfolio of ETFs or managed funds for diversification, then add high-conviction individual stocks such as Facebook, Amazon, Apple, Netflix, Google or Berkshire Hathaway in an effort to enhance performance,” Commonwealth Bank’s head of SMSF customers, Marcus Evans, said.

“The strength of this shift to increase offshore investment suggests it is being driven by a desire by SMSFs for greater diversification, rather than simply the relative performance of different markets.”

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