Featured content | Have you got the same confidence in your clients’ SMSF investment strategy since COVID-19?

Content provided by Hostplus

A well-diversified investment strategy can play an important role in providing your clients with a more stable pattern of returns, enhancing downside protection in times when there is increased volatility in investment markets and reducing the overall risk of an investment portfolio.

It’s no surprise that the need for a well-diversified investment portfolio is commonly understood by SMSF investors. Yet, even with this knowledge many SMSF portfolios remain highly concentrated in largely a few asset classes. According to some, even a portfolio of 30 individual stocks may not provide sufficient diversification.

Many SMSFs today are also increasing their portfolio diversity through direct allocations to international shares, which today’s platforms and technology has made increasingly easier. But the franked dividends and credits attached to Australian shares, along with currency risk and a lack of direct knowledge of international markets are factors contributing to a strong home market bias among SMSF trustees and advisers.

SMSFs have never had such a wide array of investments available to them than they do today. However, some asset classes, such as direct property and infrastructure, remain elusive and scarce due to a combination of the scale needed to invest in them effectively, limited avenues of investment for the retail investor and/or their adviser, and access to research to allow for the investor to make an informed decision.

The reality for many SMSF investors today, especially in a ‘lower for longer’ return environment for cash, fixed interest, and term deposits, is that there is a heavier reliance on equities to generate yield and income returns, whether that be investing directly in shares or investing in managed funds, which themselves are investing in shares.

For many institutional investors, like Hostplus, the ability to invest in asset classes such as property, infrastructure and private equity can play a valuable role within a broader investment strategy by providing consistent and reliable absolute returns over the long term, with a lower correlation to listed investment markets and thereby contribute to improved risk and return outcomes over the long term.

While SMSF investors can access residential property directly, the investible property universe is much broader and differentiated than directly held residential and commercial property, in terms of sector, geographic and economic diversification.

Generally, institutional grade properties are difficult for retail and individual investors to access, other than via listed property funds, due to the large capital outlay required, scarcity of investment opportunities and challenging nature of overseas property ownership and management.

We believe that exposure to unlisted assets can complement the typical SMSF investor’s portfolio. At Hostplus, we have built a well-diversified portfolio of infrastructure assets across multiple geographies and sectors of the economy. 

Over the long term, we continue to believe there’ll be strong demand for the infrastructure asset class, as investors continue to look for mid-risk or defensive opportunities outside of bonds.

Hostplus has developed its innovative Self-Managed Invest (SMI) product to offer SMSFs the opportunity to invest alongside one of Australia’s largest[1] and well-performed superannuation funds[2]. SMI provides a well-diversified portfolio of investment solutions, from our flagship default Balanced option and popular low fee Indexed Balanced option to our well diversified unlisted infrastructure and property options.

Our SMI product offering can assist SMSF advisers and their clients through providing additional diversification benefits to an existing portfolio with access to a range of asset classes that, until now, has proven extremely challenging for retail investors to access.

To learn more about how Hostplus SMI can play a role in your client’s SMSF investment portfolio, visit website, or call us on 1300 350 819 from 8am – 8pm (AEDT).

 

[1] APRA Annual fund-level superannuation statistics June 2020, issued 16 December 2020 based on total assets under management.

[2] SuperRatings Accumulation Fund Crediting Rate Survey – SR50 Balanced (60-76) Index, December 2020 – Ranked top five over 5-to-20 year time periods.

Hostplus Self-Managed Invest (SMI) is issued by Host-Plus Pty Limited ABN 79 008 634 704, AFSL 244392 as trustee for the Hostplus Pooled Superannuation Trust (PST) ABN 13 140 019 340. This information contains general advice only and does not take into account your personal objectives, financial situation or needs. You should consider if this information is appropriate for you in light of your circumstances before acting on it. Please read the Hostplus Self-Managed Invest (SMI) Product Disclosure Statement (PDS), available at www.hostplus.com.au/smi before making a decision about Hostplus SMI.