Self-managed super funds' home bias dragged returns for the sector in the 12 months to February, latest SuperGuard 360 research shows.
According to the SG360 SMSF Reference Index, SMSFs generated a 5.5% return (before fees and tax) - well below the returns for members invested in MySuper products.
The SG360 Default Index, which is based on MySuper returns, achieved 9.6%. This lower performance by SMSFs is the result of lower asset class weightings to growth assets especially international equities, the research said.
On a brighter note, the underperformance of international equities compared to Australian equities in February helped close the gap (See Graph 1).
February saw a dramatic decline in most global equities markets with the exception of Australia; China A Shares fell nearly 6%, although remained positive over the 12 months with a return of 9.2%. The threat of trade wars also brought a volatile start to 2018.
The major developed markets all saw large falls with the S&P500 Accumulation Index posting a negative 3.7%, while the FTSE Euro 100 fell 4% and MSCI Japan fell 3.7%. Meanwhile, the S&P/ASX 200 had a positive monthly return of 0.4%, buoyed by industrials which rose 0.6%.
But looking at it broadly over a 12-month period, international equity returns was about 6% percentage points higher than Australian equities.
Based on ATO figures, about three-quarters of SMSFs have assets less than $1 million, which means that they have higher weightings to cash and lower weightings to equities than larger higher performing SMSFs, SG360 said.
Consequently, the majority of SMSF members are in funds likely to achieve lower than ideal investment outcomes. To ensure retirement savings last as long as it should, SMSF members should review the amount they pay in fees and benchmark their portfolio to ensure it is achieving the returns they are expecting, the research said.