A- A A+

If you can't beat SMSFs, join them

30 September 2014  |  Investing

JoinThe explosion of DIY super has caught the super industry by surprise. The amount of funds under management in SMSFs is approaching $600 billion, about a third of the total pool. It is a major vote of no confidence in the professional fund management industry.

And it is a rational judgement. There is scant evidence that fund managers outperform the market for any length of time. Worse, the more they charge, the worse they tend to perform.

The flood of money into DIY super is not likely to change any time soon. But the industry funds are responding in a different way to retail funds, as the AFR points out. Instead of attacking the SMSFs (some derisively refer to them as 'selfies'), they are joining them:

 

"A number of industry funds have adopted a different approach: allowing members to create their own direct investment portfolio rather than accept the managed investments they have traditionally offered.

This is because industry funds increasingly regard themselves as large financial institutions and don’t want their members to go to another fund just because they don’t provide a particular service, suggests Ian Fryer of super researcher Chant West.

So they now allow members who believe they have the skills to choose direct investments to do so within a large fund environment.

The direct-choice investments they offer are pretty much the same: any shares from the top 300 companies on the Australian sharemarket, any choices from the growing offering of sharemarket-listed exchange-traded funds, and a range of term deposits. Cash is another investment option.

A reader who has researched a couple of the large funds’ direct investment options asks about the significance of their statements that, while members gain benefits from share investments such as capital gains, dividend payments and franking credits, the investments themselves are legally owned by the trustee. Consequently the members have no direct rights or interests in any of the shares they hold within the DIY investment option. What are the implications of this?

Suzanne Mackenzie of Adelaide-based DMAW Lawyers reckons industry and large fund trustees want to ensure that no member who chooses the direct investment option is under any impression they own the shares, the exchange traded funds or the term deposits that can be invested in via the choices."

 

The AFR has provided a table of the players:

 

 

It certainly makes more sense to offer superannuants greater control over their investments. It is the desire for more control that led to the surge in SMSFs in the first place.

 



Similar articles from Investing

A different property perspective

 | 9/24/2014

New ideaIn investment it is a case for many of "often wrong, never in doubt". It is valuable to get different views to make mature judgements. Here is one.


The fault line under the stock market

 | 9/23/2014

Fault lineA report says that about a third of Australia's listed companies are close to the edge. It is a sober reminder to SMSF investors who put their savings into the shares.


Are we heading for a banking crisis?

 | 9/22/2014

BanksAustralian banks are not holding as much equity as they did 10 years ago, and their leverage is high. Everything depends on a healthy housing market. Difficulties may be on the horizon.


What the gold price is telling us

 | 9/21/2014

GoldThe gold price is down by a third from its peak and by 10 per cent this year. What does it mean?


DIY funds invade the stock market

 | 9/16/2014

invasionDIY super investors are heavily focusing on the stock market. Following their investment habits can be effective, but there is also concern that they are not diversifying enough.


 

Subscribe

Subscribe to the Personal Super Investor weekly email to keep abreast of developments in SMSF law and investment markets. SMSF investors looking to improve investment returns from shares, property, cash or other specialised investments, will find the PSI weekly newsletter an invaluable resource.

Subscribe now »

Disclaimer

The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. Our content is not intended to be advice and must not be relied upon as such. You should seek independent advice tailored to your specific circumstances prior to making any decisions. Personal Super Investor does not provide financial product advice or recommend any financial products: Where this website or it derived newsletter/electronic publication refers to a particular financial product, whether it be within our editorial or a 3rd party advertising, advertising promotion or advertorial, then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice from a financial adviser before making any decision to purchase any financial product referred to on this website. We do not make any representation or warranty that any material on the Personal Super Investor website will be reliable, accurate or complete, nor do we accept any responsibility arising in any way from errors or omissions of our content or any content provided by any advertiser appearing the Personal Super Investor website. We will not be liable for loss resulting from any action or decision by you in reliance on the Material (whether editorial or advertising) on the Personal Super Investor website, nor any interruption, delay in operation or transmission, virus, communications failure, Internet access difficulties, or malfunction in your equipment or software. By using the site you acknowledge that we are not responsible for, and accept no liability in relation to any content contained on the site that you may use, including any other users’ use of the Personal Super Investor website in any circumstance. You use the Personal Super Investor website at your sole risk.