Larger SMSFs match performance of APRA funds

Mike Taylor

Managing Editor/Publisher, Financial Newswire

27 April 2023

Most self-managed superannuation funds (SMSFs) are more than holding their own against the performance of large, APRA-regulated funds but are more likely to consistently do so if they have balances over $200,000.

That is the bottom line of new analysis conducted by the SMSF Association and the University of Adelaide based on SMSF performance over 2020-21.

The analysis found that SMSFs generally out-performed APRA funds in challenging market conditions while tending to be laggards in bull markets.

The research concluded: “We again show that SMSFs perform on par with, or better than, APRA funds in some financial years”.

However, it went on to that: “In years where the APRA fund sector outperforms the SMSF sector, adjusting for small funds that have scalability headwinds and those that are excessively cash-concentrated accounts for much of the performance differentials we document”.

“This underscores 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 in excess of $200,000.”

“Finally, we show some novel evidence comparing the relative performance of pension versus accumulation phase SMSFs. While the performance varies year-on-year between 2020 and 2021, notably, it appears to be substantially driven by how much listed domestic equity funds hold.”

Commenting on the research, SMSF Association chief executive, Peter Burgess said that it showed that from an overall SMSF sector perspective, there was no systemic under-performance when compared to the APRA fund sector.

He noted that the report found that in years where the APRA fund sector outperforms the SMSF sector, removing funds with balances under $200,000, and which have 80% or more of their assets invested in cash, accounts for much of the performance differentials.

Burgess adds that the research reinforces the Association’s stance on the importance of professional advice.

“The research couldn’t be clearer – helping SMSF members understand the benefits of asset diversification, and the performance headwinds encountered by small funds (balances under $200,000), will improve the overall performance of the sector.”