SMSF portfolios continue to underperform

Self-managed superannuation funds (SMSFs) are expected to continue to underperform as a result of lower asset class weightings to growth assets especially international equities, according to SuperGuard 360.

The company said that its latest SMSF performance indices showed that for the 12 months to 31 December, 2017 the SG360 SMSF reference index returned 9.2 per cent, underperforming the 10.5 per cent achieved by the SG360 default index which was based on MySuper products.

Also, over 10 years both the SG360 SMSF reference index returned 4.8 per cent per annum, slightly underperforming the SG360 default index which returned five per cent per annum.

At the same time, over the five-year period the gap was more in favour of the SG360 default index (9.6 per cent per annum versus 7.8 per cent per annum), the company said.

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As a result, over 10 years the portfolio of the SMSF member would have grown a $100,000 investment into around $160,000 and someone in the average workplace superannuation default investment option would have grown a $100,000 investment into around $160,000.

Also, according to SuperGuard 360, smaller SMSFs which traditionally held lower allocations to equities were more likely to underperform by an even wider margin.

The SG360 SMSF reference index describes the post-fee investment return a SMSF trustee would receive in their account if they invested passively using the asset allocation represented by SMSF asset distribution published by the Australian Taxation Office (ATO).