Cash allocations of SMSFs have reached record low proportions, reports Multiport SMSF Investment Patterns Survey. The cash holdings, reportedly, are being curtailed in favour of seeking the overseas market; higher returns in international equities being the major lure. Tim McArthur reports for the website The Motley Fool.
Global equity market
International equity and property sectors are the buzzwords and the abysmal 18.3% SMSF cash allocation can be put down to this. It is likely that the rates of interests for the bond and term deposits are not appealing the trustees of the Self-managed Superannuation Funds anymore.
SMSF investors taking the route of managed funds
Another thing worth noticing is that the trustees are not showing penchant towards direct investments in the global equity markets. For them, the route of “managed funds” is decidedly the better one. Are the domestic managed funds with global interests keeping their ears open?
Investors eyeing asset diversification
Global equity markets are growing at nothing short of a phenomenal rate and restriction of exposure to the domestic market may make them miss out on the goodies lying overseas, feel SMSF investors. So they are relying fiercely on vehicles like ASX’s mFunds Products to help them gain entry into the global investment pool.
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With Australian Investment-grade bond yields not offering lucrative deals, looking overseas for the right kind of asset diversification may prove to be a smart SMSF strategy. Moreover, global equity is a sure fire way of guarding against any future threat of inflation. I know there is not even an iota of such a threat now but when the cash rate corrects itself, it may do so alarmingly and this may put some inflationary pressure, making global fixed income alternatives a kind of welcome shelter.