Digital asset adoption in SMSFs not a surprise: Burgess

New data shows more self-managed super funds (SMSFs) are rapidly adopting digital assets in their portfolios, but SMSF Association chief executive Peter Burgess said it isn't a worry to him if all entities remain compliant under their respective obligations.

Findings from OKX's Voting with Their Super; Digital assets, SMSFs and the structural transformation of Australian retirement savings report, which surveyed some 820 investors, including SMSF trustees with and without crypto investments, and crypto investors with and without SMSFs, indicated almost half (46%) of trustees holding digital assets in their SMSF said the access to digital assets was the primary reason they established the fund.

Among the same cohort, nearly half allocated more than 50% of the fund to the asset class, and 28% held more than 90%, displaying a highly concentrated position.

Further, one in five (20%) had established their SMSF in the same year as their first digital asset investment.

Observing this, OKX believes industry super funds failing to increase investor preferences for certain asset classes may see some members continue to enter the self-directed structure.

"Industry super funds still have time to respond. The window is finite, and narrowing," OKX Australia chief executive Kate Cooper said.

"What comes next is the question that matters most. Digital assets are the catalyst in this story. The destination is larger. The underlying preference driving this behaviour is for investment autonomy and access to a broader set of assets. As tokenisation of real-world assets matures, that preference will only intensify."

In response to the findings, Burgess told Financial Standard it is common for an asset class presenting such high conviction, like digital assets, to receive the current level of attention.

"When you think about digital assets being the one of the fastest growing asset classes out there, the only way, from a super perspective, people can get access to that asset class is via an SMSF. In that regard, we're not surprised of what we're seeing right now," he said.

He also emphasised many SMSFs would concentrate on a single asset due to value appreciation initially but diversify their portfolio down the track. Additionally, many would still have super in their APRA fund, utilising the SMSF as a broader "super diversification strategy".

"We know when they first set up their fund, they can invest quite a large percentage of the fund portfolio into digital assets but then over time, diversify, and that's consistent with what we have seen in the way people invest over time," he explained.

"They may be using future contributions they receive by the fund to diversify over time. It's consistent with life cycle investment principles in that regard.

"The report says many of these investors hold a balance in an APRA fund as well; they can't access digital assets via their APRA funds and are looking to access this particular asset through their SMSF, being part of a broader super diversification strategy."

He agrees with the report highlighting the need for more holistic and bespoke advice in the sector, but the broadened access from digital asset platforms is providing support as well, so long they remain compliant under the law.

"A lot of these types of platforms are providing functionality to help investors with the necessary compliance obligations and that's a good thing," he said.

"As long as they are registered with AUSTRAC and ASIC, remain compliant, are not overstepping in terms of the information they provide for SMSFs and don't provide unlicensed advice, there isn't really a concern about it."

It comes as Coinbase Australia is also entering the SMSF sector with the launch of Coinbase SMSF, following a similar offering launched by OKX last year.

Coinbase SMSF will provide onboarding, reporting, security and custody capabilities for SMSF trustees.