Defensive asset classes have been marked as the segment to watch, with more flows and demand expected from SMSF trustees in the next 12 months following continued market volatility.
“I think defensive [investing] is going to be a big theme for a while for SMSF investors,” BetaShares managing director Alex Vynokur told selfmanagedsuper.
“We’ve found that defensive and managed risk products are going to continue to see a lot of demand, especially looking at the need for income.”
Vynokur said he believed income strategies combined with managed risk and diversification, through the US dollar for example, would continue to be popular with SMSFs. “Those themes will continue playing out because we’re really in uncharted waters at the moment,” he said.
“The global central banks are playing a game of currency wars, which is throwing traditional valuation models out the window, so how do you value equities, for example, in an environment of negative interest rates?
“So investors are really positioning their portfolios more defensively.
“That’s not to say that we predict an Armageddon in the market and we certainly do not believe that there is a reason to panic, but we think there is reason to be prudent and there is reason to position portfolios more defensively in light of the volatility.”
BetaShares’ exchange-traded funds (ETF) that were defensive in nature were growing strongly and attracting healthy interest, he revealed.
“We’re not seeing as much growth in our resources and financials sector ETFs – they’re less popular with investors at the moment as their mindsets are a lot more [focused] on protecting wealth and their nest egg,” he said.
“We have investors who we’ve seen allocate to gold, foreign currency like the US dollar as a way to protect against devaluation in the Australian dollar, and we’ve seen investors diversify into bonds and into cash, so there is a significant amount of diversification that investors are able to achieve through the ETF market and that’s been happening to a large extent over the last few years.
he equity market and it’s very clear why people are thinking of diversifying.
“Our gold ETF has doubled in size over the period of the last few months as investors have been allocating increasing amounts of money to gold because it’s come back on the agenda as a safe haven.”