The Multiport SMSF Investment Patterns Survey - December 2011

John McIlroy, CEO Multiport Pty Ltd

To get a closer insight into where SMSF trustees invest, Multiport regularly undertakes an analysis of our SMSF’s investments to look at the up to date asset allocation and investment trends which have or may be emerging.

The survey covers around 1,600 funds, a sample of the SMSF’s that we administer and the investments they held at 31 December 2011. Funds are administered on a daily basis which ensures that data is based on actual investments and is completely up to date. The assets of the funds’ surveyed represent approximately $1.3 billion.

Increase to Cash, Short Term Deposits and Fixed Interest

The December quarter saw cash holdings increase again by nearly 2% and while Fixed Interest assets, which increased last quarter, fell by 2.5% this quarter. Australian Shares exposure also fell by 0.6%. The cash holdings have increased from around 22% at the start of 2011 to close to 27% at year representing a 21% increase in holdings.

The data would appear to indicate that a significant number of term deposit maturities have not been rolled over. This looks to be attributed to two consecutive interest rate falls in the quarter and investor uncertainty about the direction of interest rates in 2012. The money is being held in shorter term deposits and cash.

Sector	31 Dec 2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep  2011 (%)	31 Dec 2011 (%)
Cash and short term deposits	21.9	21.8	22.8	24.7	26.7
Fixed Interest	11.8	11.0	12.3	14.1	11.5
Australian Shares	41.4	41.0	38.9	36.0	35.4
International Shares	7.1	8.8	8.7	7.9	7.7
Property	15.7	16.1	16.0	16.8	17.6
Other (Hedge funds, agricultural funds, and private geared and ungeared trusts)	2.1	1.3	1.2	0.5	1.1
Total	100.00	100.0	100.0	100.0	100.0

Source: Multiport Pty Ltd

Cash holdings move up

Cash holdings have increased by a further 2% and are now 26.7% as at December 2011, which is its highest level in 2 years.

The average contribution inflow for the quarter was down to $6,980 which is significantly lower than last quarter but on par with contributions for the same time last year. The bulk of contributions are being made in June with some flowing over to the third quarter.

Benefit and pension payments from the SMSFs were higher than the average inflow of contributions, at around $10,785 per fund in the December quarter. This is significantly lower that the previous quarter but in line with historical pattern, which indicates that the larger withdrawals were related to potential re-contribution strategies as well as meeting minimum pension levels.

Australian equities exposure falls

Even though the Australian share market rose for the quarter the overall allocation fell. This would indicate that there was a degree of profit taking as well as redemption due to market volatility.

	31 Dec  2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep 2011 (%)	31 Dec  2011 (%)
Direct Shares	34.2	34.2	32.5	30.0	30.0
Managed Fund	7.2	6.8	6.4	6.0	5.4
Total Australian Shares %	41.4	41.0	39.0	36.0	35.4

Source: Multiport Pty Ltd

Top 10 Australian Shares

The December quarter saw the top 5 companies remain unchanged and then some shuffling around for positions at the tail end. Interestingly the Top 10 shares make up 15% of total assets held and this remained unchanged over the past two quarters.

The most commonly held ($ invested) shares at 31 December 2011 were:

Ranking	Company
1	BHP Billiton
2	Commonwealth Bank
3	Westpac
4	ANZ
5	National Australia Bank
6	Woolworths
7	Telstra
8	Wesfarmers
9	Woodside
10	Rio Tinto

Source: Multiport Pty Ltd

International holdings

Major International markets performed well during the quarter but the impact of the $AUD appreciation reduced this positive return. This indicates that the uncertainty in offshore markets (the European woes) has led to further removal of money from this sector.

The split between managed funds and direct investment continues to show investors preference in using managed funds as a preferred method of investing in overseas markets.

We have not yet seen a significant take up of ETF’s as a replacement for international managed funds yet but 4% of the overall international holdings is now held via ETFs.

	31 Dec 2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep 2011 (%)	31 Dec 2011 (%)
Direct Shares	0.7	0.8	0.9	1.0	1.0
Managed Funds	6.4	8.0	7.8	6.9	6.7
Total %	7.1	8.8	8.7	7.9	7.7

Source: Multiport Pty Ltd

Property allocation

Direct Property allocation continues to rise and in this quarter has reached 15.4% - its highest level since December 2008. This reflects the ongoing acquisitions in this asset class and use of gearing strategies. Managed funds however remained steady at 2.2%.

As gearing within SMSFs continues to increase in appeal, perhaps exacerbated by current share market uncertainty, trustees are turning to property and gearing. Companies are developing products to make this process easier for trustees. Multiport released a property gearing package earlier this year and have seen an increase in investment in this area in the past quarter.

On analysing our data we see that 20% of our total direct property investors have geared their properties. We will continue to monitor this figure for future reference.

	31 Dec 2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep 2011 (%)	31 Dec 2011 (%)
Direct Property	12.4	13.7	13.7	14.5	15.4
Listed Property, Managed Funds & Syndicates	3.3	2.4	2.3	2.3	2.2
Total %	15.7	16.1	16.0	16.8	17.6

Source: Multiport Pty Ltd

Fixed Interest

This quarter the managed funds remained fairly steady but deposits and other holdings dropped by 2.5%. This suggests that as longer duration deposits have reach maturity they have been placed into shorter term deposits and cash due to uncertainty about the future interest rates direction.

	31 Dec 2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep 2011 (%)	31 Dec 2010 (%)
Deposits, Hybrids & Other direct holdings	9.3	13.7	9.9	11.6	9.2
Managed Fundss	2.5	2.4	2.4	2.5	2.3
Total %	11.8	16.1	12.3	14.1	11.5

Source: Multiport Pty Ltd

Exposure to Managed Funds

The survey has again reflected an 80/20 split of investments with the direct investment approach highly favoured. The major exception is still International Shares where primary exposure is via Managed Funds.

	31 Dec  2010 (%)	31 Mar 2011 (%)	30 Jun 2011 (%)	30 Sep 2011 (%)	30 Dec 2011 (%)
Cash & Fixed Interest	2.7	2.6	2.6	2.7	2.6
Australian Shares	7.2	6.8	6.4	5.7	5.4
International Shares	6.5	8.1	7.8	6.9	6.7
Property & Other	4.1	3.3	2.9	2.9	2.8
Total %	20.5	20.8	19.8	18.2	17.5

Source: Multiport Pty Ltd

SMSF Trustees utilising limited recourse borrowing arrangements

Around 15% of the funds in the survey are currently utilising a borrowing arrangement. The graph below shows the split of borrowing arrangements across direct property and financial assets at 30 September 2011.


The average property loan amount is $279,000 compared to $96,000 against financial assets.

John McIlroy is the CEO of Multiport, a leading specialist SMSF and Managed Account administration company. The vast majority of Multiport administered SMSFs have a wide range of financial advisers providing investment advice to the trustees and this may make the analysis results different to the wider SMSF community.