Self-managed super fund trustees are generally aware of the benefits of diversification, but many trustees still focus their investment portfolios in just two assets: Australian shares and Australian property.
To an extent, this is understandable. Australian shares and property have been the beneficiary of an economy that hasn’t been in recession in 26 years, and these two assets have performed well on the back of Australia’s world record period of sustained growth.
Furthermore, it’s what a lot of SMSF trustees know. They invest in Australian bricks and mortar and companies they know and use such as banks and supermarkets.
However, if your portfolio has too much of a “home bias” it can have serious ramifications when the Australian economy eventually pulls back. More importantly, home bias can leave you underexposed to other asset classes driving global economic growth, such as emerging markets, or assets that can offer security in times of uncertainty such as bonds. According to a recent survey, Australian shares make up 35% of SMSF assets, yet the allocation to international equities is almost a third of that amount at just 13%.
So how can SMSF trustees get exposure to these asset classes?
Many SMSF trustees are starting to use automated investment services (or robo-advisors) to diversify their investments at low cost via quality exchange-traded funds. Robo-advisors provide portfolio recommendations covering a range of asset classes that trustees may never have used for their investments. These assets have different strengths and weaknesses that tend to balance each other out at different points in market cycles.
Diagram: Six Park invests over the following seven asset classes
At Six Park we provide portfolios invested in seven different asset classes tailored to the client’s own risk profile. Our portfolios are continually rebalanced when required and overseen by our experienced Investment Advisory Committee.
Australia makes up less than 3% of the world’s investable opportunities, and robo-advice is an accessible and transparent way for SMSF trustees to access the remaining 97%. To get an idea of the level of diversification that you will achieve with our Balanced Growth portfolio, the map below highlights where our seven ASX-listed exchange-traded funds invest around the world.
Map: Countries represented within Six Park’s Balanced Growth portfolio (2017)
For the last 12 months to October 2017 our balanced growth portfolio returned 13.3% (and our high growth portfolio produced 15.6%)… and importantly that’s after all our fees! We can’t always guarantee returns like this but that’s why we invest all our clients in defensive assets like bonds and infrastructure as well as growth assets like equites/shares.
Many of our clients use Six Park to provide and manage their core investment portfolio as above while continuing to invest in other assets that fit within their overall strategy (such as Australian property and equities). This is often called a “core and satellite” approach, with Six Park making up the ‘core’ and the ‘satellites’ made up of other assets.
Diagram: Six Park portfolio as part of a ‘core and satellite’ strategy for SMSF trustees
So why should Six Park be a strategic part of your investment portfolio?
At Six Park we offer clients:
- A professional internationally diversified portfolio tailored to your own risk profile
- Ongoing oversight by our experienced Investment Advisory Committee of your Six Park portfolio
- Exposure to seven asset classes that current SMSF trustees may currently have little or no exposure to
- Automated rebalancing when assets drift from your targeted asset allocation
- Proven track record of performance that we’re proud of
- Low fees (for example, on a $200,000 portfolio our fee is just 0.4%, or $800 a year, which includes all trades, rebalancing, and oversight from our Investment Advisory Committee)
- The option to choose for distributions to be paid in cash or reinvested into your portfolio
- Accounts in your own name with your own trading account and HIN, with the ability to increase or decrease the size of investment portfolio at any time (see more frequently asked questions)
- Peace of mind that even though you may have a ‘set and forget’ mindset towards your investments, they will continue to be overseen by the Six Park team located in Australia.
If you would like to find out more, please try our free online risk assessment to see how Six Park can fit within your own “core and satellite” SMSF strategy, or contact me at [email protected] so I can answer your questions or you can find out more.