There has been a lot of commentary in the newspapers recently discussing the potential for self-managed superannuation funds to push up housing prices. But the facts don't yet match the hype. The overall exposure of SMSF's to property is only moderately higher than institutional funds, and its actually 75% in commercial property, meaning less than 5% of SMSF assets are currently invested in housing.
Of course it is a shift in allocations that moves prices, not the absolute level. An allocation shift from 5% to 20% would mean tens of billions of dollars of residential property demand.
More of a concern, though, is the SMSFs' higher allocation to cash and almost non-existent allocation to foreign equities. Over the long term, this is more likely to hamper returns than a 10% allocation to residential property.
The higher allocation to 'other' is concerning too. Whereas the institutions are investing in unlisted infrastructure, private equity and hedge funds, the 'other' money in SMSFs is probably invested in art or a friend's small businesses. There are going to be plenty of disaster stories in the SMSF space, but I'm not sure residential property should be the main area of concern.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.