Points and spreads: A new perspective on SMSF performance

National Conference 2022

We examine SMSF performance for a large sample of funds over the period 2017–2019. Historically, performance comparisons between SMSFs and APRA funds have been hampered by regulatory and methodological differences. We address these issues by constructing a Rate of Return (ROR) measure for SMSFs which relies on a comprehensive set of financial statement items. Our results allow us to benchmark SMSFs appropriately, demonstrating not only how their performance varies relative to APRA funds, but also how underlying characteristics such as fund size and asset allocation relate to fund performance.

The research also offers a key innovation. We introduce a new method for comparing overall return distributions in the sector, a method which is easy to implement and intuitive to understand. We find that SMSFs generally perform on par with APRA funds and that, while fund size remains an important factor in explaining performance, it is perhaps less important than we initially understood.

At the end of this session, you will be able to: 

• Understand that Rates of Return for SMSFs can be generated and should be made publicly available at the aggregate level;
• End-user understanding of fund performance statistics likely benefits from the inclusion of return distribution summaries; and,
• Understand SMSFs with balances between $200,000 and $500,000 generate comparable returns to those generated by larger SMSFs.