SMSFs survive market downturn to outperform median APRA fund

New research from the University of Adelaide’s International Centre for Financial Services (ICFS), commissioned by the SMSF Association, found returns from self-managed super funds (SMSFs) outperformed the median Australian Prudential Regulation Authority (APRA) fund by four percentage points.

The research analysed 394,000 SMSFs, accounting for 67 per cent of all SMSFs, in the 2021-22 financial year, indicating a fall in investment returns of only one per cent, compared to the median APRA fund’s 5.1 per cent fall and the S&P/ASX 200 index’s drop of more than 10 per cent.

The study also showed 38 per cent of SMSFs that participated delivered positive returns in 2021-22, compared with less than five per cent of APRA funds.

“In our opinion the outperformance by SMSFs was due, in part, to being underweight international equities and overweight domestic equities in a year where the local market outperformed some international markets,” Dr George Mihaylov, head of the ICFS project commissioned by the SMSF Association, said.

“We have shown in earlier research that less than two per cent of SMSFs hold international equities, most often with allocated weightings that are low. This is in stark contrast with APRA funds, of which a much larger proportion diversify internationally, typically with larger weightings.

“Although this home bias generally leads to sub-optimal levels of investment diversification, it can also act to boost earnings and returns during periods where the domestic stock market outperforms some key international markets – precisely what happened in 2021-22 relative to the U.S.

“Another contributing factor to this outperformance was that a substantial sub-group of SMSF trustees pursue defensive asset allocations and defensive asset classes.”

SMSF Association chief executive, Peter Burgess, said the research continues to add to the “mounting evidence” supporting the strong performance of SMSFs.

“Over the period 2017-2021, SMSFs have outperform APRA funds in some financial years, and this now includes 2021-22.

“From the Association’s perspective, what is particularly gratifying is the indication that those SMSFs getting financial advice tend to perform better. It’s always been our mantra that SMSF trustees should get professional advice.”