Will the recent share market volatility and steep decline in some of the Australian markets favoured stocks finally push SMSF investors overseas?
In a recent article by Miranda Maxwell for The Australian, she suggests this trend could finally fuel overseas investments by SMSFs. With the total number of SMSF assets now totalling $590 billion, only $1.8bn was invested in overseas shares in the June quarter, equating to less than 1 per cent.
This means that SMSFs are by and large not gaining exposure to firms such as “Apple, Google and Amazon, with their unparalleled revenue streams” and other growth areas such as “healthcare and technology on a scale unavailable locally”.
The problem with not looking at overseas, is that as mentioned in our blog post Performance of SMSFs international equities can significantly improve returns as occurred in 2013 as opposed to a portfolio only invested in Australian equities.
Despite all this, it seems SMSF trustees are reluctant to diversify overseas sighting the “lack of control and transparency” as well as “fees of 100-to-200 basis points” as reasons for not looking at the sector. Maxwell summarises these factors concisely by pointing out that the “barriers to entry” are “too costly to lure SMSFs across the line”. Yet with ETF’s inside SMSF’s as a way to overcome these two obstacles and get exposure to overseas equities along with providing “an important foreign exchange risk buffer”, this really is more a perception amongst SMSF investors than a reality.
Ultimately, with the “US seemingly about to reverse course on interest rates, and Australia facing headwinds from a slowing China”, looking at overseas equities is certainly something that all SMSFs should be looking into.