Research released last week from Adelaide University’s International Centre for Financial Services (ICFS) has shown SMSFs outperformed Australian Prudential Regulation Authority (APRA)-regulated funds over the past five years.
Specifically the study found SMSFs achieved an average rate of return 1.1 per cent higher than their APRA-regulated counterparts for the five years to 30 June 2024.
This finding perpetuated the similar results recorded over the five years to 30 June 2023, when SMSFs outperformed public offer funds by 1.2 per cent.
“SMSFs remain a compelling option when they are used under the right circumstances and managed effectively,” SMSF Association chief executive Peter Burgess said.
“For Australians seeking greater flexibility, control over investment decisions, estate planning advantages, and the ability to tailor strategies to their individual circumstances, establishing an SMSF can be a highly effective structure, particularly when supported by specialist professional advice,” he added.
The exercise also revealed the significant spread in the range of financial outcomes when SMSFs were compared to APRA-regulated funds. Here the top 25 per cent of SMSFs achieved rates of return of at least 13 per cent.
“This wide dispersion clearly shows the dual nature of SMSF investing,” Burgess said.
“SMSFs can deliver exceptional outcomes, but without appropriate strategy and guidance, they can also significantly underperform. That variability reinforces why professional advice is so critical for trustees,” he suggested.
Further he pointed out trustees who used financial advisers were better able to manage their SMSFs and give them more of a chance to outperform, while also acknowledging this type of retirement savings vehicle was not appropriate for everyone.
“This is particularly relevant given recent instances of unscrupulous operators using high pressure tactics, encouraging individuals to establish an SMSF despite it not necessarily being in their best interest,” he explained.
ICFS project lead George Mihaylov indicated the data highlighted the unique performance profile of SMSFs.
“While APRA funds outperform SMSFs at the median, stronger upper-tail outcomes in the SMSF sector often lift average SMSF returns above their institutional counterparts,” he said.