Cash no longer the asset of choice

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SMSF funds are now picking shares as their asset of choice, in response to historically low interest rates.

Andrew Rogers, Head of CMC Markets Stockbroking says that this is not surprising, and expects an even greater shift from cash and term deposits to listed shares.

“Direct shares allow the trustee complete control and transparency over the portfolio along with flexibility in terms of buying and selling at the time of the trustee’s choosing – not at the time it suits a super fund, for example. This gives trustees the ability to pursue ethical or other investing agendas and to adjust and rebalance the investment portfolio in line with their own bespoke model to achieve the outcomes they want,” said Rogers.

However, SMSFs are still playing it relatively safe, typically holding only four different types of securities – and have a strong leaning towards the big bluechips that make up a significant share of the ASX 200.

Rogers says that if the trend continues, the amount of money coming through the super system in the next few years could have a material effect on the weighting of the ASX 22 benchmark.

Deloitte figures show that in 2033, the pool of superannuation assets will be $7.6 trillion, or 180% of GDP.

“As more money goes into the Telstras and Westpacs and BHPs, then the yield on the dividend won’t be as attractive because the price would’ve gone up,” says Rogers. “Our view is that money will go into the stocks below that, which will impact on the overall index weighting.”

Currently, materials is the top share sector, favoured by 25.16% of SMSFs, followed by banks, diversified financials and insurance at 17.51%.

However, this differs by geographical location. CMC’s data shows that SMSFs on the eastern seaboard showed a particular preference for financial and bank stocks while SMSFs in WA were more likely to hold energy and material stocks. Queenslanders were heavier in stocks across Foods and Staples such as Woolworths (WOW) and Wesfarmers (WES).

Rogers says that it stands to reason that people invest in what they know – the average person on the street in WA can tell you the price of iron ore, he says.

The more surprising trend for Rogers is that despite an evenly spread client base across Australia, they have more SMSF clients in NSW than anywhere else. Nearly half (46%) of their SMSF investors are based in NSW, followed by QLD at 23% and VIC at 17%.

“I don’t know whether that’s because they’re serviced better in NSW in terms of the ability to establish an SMSF and support it, but it would be good to see growth in the other states, because everybody’s got the same problem in terms of investing and looking at retirement.”

The top 20 stocks traded by SMSFs (in order) are as follows:

  1. TLS Telstra Corporation – Telecommunication Services
  2. WBC Westpac Banking – Corp Banks
  3. BHP BHP Limited – Materials
  4. NAB National Australia Bank – Banks
  5. ANZ ANZ Banking Group Ltd – Banks
  6. CBA Commonwealth Bank – Banks
  7. WOW Woolworths Limited – Food & Staples Retailing
  8. WES Wesfarmers Limited – Food & Staples Retailing
  9. WPL Woodside Petroleum – Energy
  10. RIO Rio Tinto Limited – Materials
  11. QBE QBE Insurance Group – Insurance
  12. AMP AMP Limited – Insurance
  13. SUN Suncorp Group Ltd – Insurance
  14. MTS Metcash – Food & Staples Retailing
  15. NCM Newcrest Mining – Materials
  16. TOL Toll Holdings Ltd – Transportation
  17. MQG Macquarie Group Ltd – Diversified Financials
  18. AGK AGL Energy Ltd – Utilities
  19. ORG Origin Energy – Energy
  20. CCL Coca-Cola Amatil – Food & Staples Retailing