SMSF, Superannuation

SMSFs deliver strong results

SMSF investment returns

The latest sector research has confirmed SMSF investment returns were comparable to those of APRA funds for the 2020 and 2021 financial years.

New annual performance tables released today by the University of Adelaide International Centre for Financial Services (ICFS) show SMSF investment returns generated during 2019/20 and 2020/21 were comparable to Australian Prudential Regulation Authority (APRA)-regulated funds.

Specifically, the “Self-Managed super fund performance 2020/21” report revealed SMSFs outperformed public offer funds during the market contraction in 2019/20, producing a headline return of -0.6 per cent as opposed to the -1.2 per cent APRA-regulated funds delivered for the same year.

When a market recovery was witnessed in 2020/21, the analysis indicated SMSFs slightly underperformed APRA-regulated funds, generating a headline return of 14.8 per cent compared to the returns of 16 per cent public offer fund members enjoyed over that income year.

According to SMSF Association chief executive Peter Burgess, the report confirmed how strong the performance of the sector has been.

“We know the actual performance of an SMSF is dependent on the fund’s investment allocation and therefore may bear little resemblance to these headline investment returns,” Burgess noted.

“However, what this report and the research released last year for the period 2017-19 shows is that from an overall SMSF sector perspective, there is no systemic underperformance when compared to the APRA fund sector.”

When examining the potential causes for performance in bull market conditions, the ICFS found the return gap between SMSFs and APRA-regulated funds could in the main be attributed to funds that had balances below $200,000 and funds where the portfolio had an 80 per cent or higher allocation to cash.

In addition, the study tested the effect of the old demographic of members that characterises the SMSF sector and in particular the implications of having more individuals in pension phase.

To this end, the University of Adelaide found a significant improvement in sector returns for 2019/20 with very little detrimental impact in 2020/21.

“The difference in the performance of the SMSF sector when these funds were removed from the data sample could be traced, in the main, to pension-phase funds having a larger allocation to Australian equities,” Burgess noted.

“This explains why removing these funds from the sample in a bull market actually has a detrimental impact on the performance of the sector.

“But there is no evidence the performance differential is due to pension-phase funds having a higher allocation to defensive assets as the research found both pension and accumulation-phase funds allocated remarkably similar proportions of their overall net assets to cash and term deposits.”

The results also highlighted the disparity between the ICFS tables and ATO performance data, the latter of which showed a sector return of -1.5 per cent for 2019/20 and 12.9 per cent for 2020/21. The difference was attributed to the more extensive data inputs and methodology the University of Adelaide used.

In summing up the report’s findings, University of Adelaide research professor Ralf Zurbruegg noted: “Our results show that overall financial performance of the SMSF sector remains robust, weathering the 2020 COVID-induced market storm relatively better than the APRA fund sector.

“Our analysis also continues to highlight how SMSFs benefit from professional advisory services, especially underscoring the value of trustee education on the benefits of diversified asset allocations and the importance of individuals selecting into SMSFs appropriately based on threshold superannuation balances of more than $200,000.”

Research the University of Adelaide undertook last year revealed SMSFs with balances of $200,000 or over performed comparably with APRA-regulated funds.

The “Self-Managed super fund performance 2020/21” report was commissioned by the SMSF Association and analysed information from more than 310,000 SMSFs with nearly 546,000 unique performance observations over the two financial years. The data was sourced from the client bases of Class, SuperConcepts and BGL Corporate Solutions.

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SMSF investment returns.


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