SMSFs outperform large funds over 8 years, just

Note: The ATO publishes an annual report about SMSFs for each financial year. This article covers the latest SMSF performance data available from the ATO, as at January 2016. The ATO will provide updated performance data (for year ending 30 June 2015) in late 2016.

A common argument put forward against individuals starting a self-managed super fund is that budding SMSF trustees could lose their hard-earned super savings through inexperienced investing, and bad investment decisions. Until relatively recently, there wasn’t much evidence confirming or denying this ‘world view’ mainly proffered by the large super fund sector.

The ATO now publishes SMSF performance data and the real story is quite startling. SMSFs had outperformed the large fund sector (corporate, industry and retail funds in three years out of eight, and performed equally in another year. Over the 8-year period to 30 June 2014 however, SMSFs outperformed the large fund sector, just!

SMSFs outperform over the long term, on average

When you look at the average annual return over the 8-year period that the ATO statistics cover, the recent outperformance by the large fund sector does not prevail over the longer term. Based on the figures in the table below (see later in article), the average annual return over the 8-year period to 30 June 2014, is:

  • 4.99% a year, for SMSFs
  • 4.8% a year, for large super funds.

In anyone’s language the long-term averages listed in the bullets above are not impressive for either category of super fund, but note that the Global Financial Crisis occurred during this period.

We will be able to get a better sense of long-term investment performance when the ATO releases the 2015 financial year performance data.

Important: The average return figures for 8 years listed above are calculated by SuperGuide, and are not official ATO figures (since the ATO does not produce these calculations). The calculations however are based on official data appearing in the table below, sourced from several ATO reports. Some yearly returns have been adjusted by the ATO over time, and these adjustments are incorporated into the table below. Several investment websites have been publishing previous versions of the SuperGuide calculations, and relying on our analysis, without attributing our site as the source or seeking SuperGuide’s permission. Instead, they are quoting the 8-year averages (or 7-year average annual returns from previous editions) as ATO official figures.

Large funds outperform SMSFs on a year-by-year basis

Now that updated performance figures for the 2014 financial year are available (delivering 11.7% for large funds, compared with 9.8% for SMSFs for 2014 year), the large fund sector wins the outperformance year-by-year debate. With the adjustment to the performance figures for the 2014 financial year, the large fund sector can now claim to outperform SMSFs 4 years out of eight.

SMSFs outperformed large super funds for the three years ended 30 June 2007, 30 June 2008, 30 June 2009, but large super funds performed better for the years ended 30 June 2010, 30 June 2011, 30 June 2013 and 30 June 2014. For the year to 30 June 2012, both SMSFs and the large fund sector each delivered 0.4%, according to the ATO.

Investment performance
Financial yearSMSFs (%)Large funds (%)Outperformer
200716.7%14.5%SMSF
2008-5.9% (loss)-8.1% (loss)SMSF
2009-6.7% (loss)-11.5% (loss)SMSF
20107.7%9.3%Large funds
20117.7%8.1%Large funds
20120.4%0.4%SMSF and Large funds
201310.2%14.0%Large funds
20149.8%11.7%Large funds

Note: While the methodology used to estimate SMSF performance resembles APRA’s, the data collected is not the same. The data in the table above is sourced from six ATO reports: SMSFs — A statistical overview 2013-2014, SMSFs – A statistical overview 2012-2013, SMSFs – A statistical overview 2011-2012, SMSFs – A statistical overview 2010-2011, SMSFs-A statistical overview 2009-10, and SMSFs – A statistical overview 2008-09.

smsf-vs-large-funds-performance.001

Source: Table created by SuperGuide using ATO performance data. 

For more information on investment performance and asset allocation see the following related SuperGuide articles:

You can also check out the following ATO reports on the ATO website:

Related articles

Comments

  1. The very high correlation between ROA and fund size with the SMSFs >$2M showing much better performance than even the SMSFs $1m – $2m noticed by Robert R was also independently noticed by myself.
    I’d like to add another possible explanation to Robert R’s for why the performance was so much better for the SMSFs >$2M than even the SMSFs $1m – $2m. Perhaps people who are very good at investing end up with the highest balance! Keep it simple.

  2. Robert R says:

    Hi Trish,

    Interesting data but the ATO comparison is a bit of a blunt tool.

    I followed the link and had a look at the full report. What struck me most is the very high correlation between ROA and fund size with the SMSFs >$2M showing much better performance than even the SMSFs $1m – $2m.

    Just why the performance is so much better for the largest SMSFs over the next band of SMSFs is not explained in the report. We could conjecture that people with the highest balances are the most engaged, or perhaps people with such high balances are more likely to engage professional investment advice, or perhaps those with the highest balances are less adverse to higher risk (volatility) investments. In any case, there is no such correlation in the large funds where performance is very much dependent on which fund the member is invested in rather than the balance of their account.

    If you compare the average performance of the different bands of SMSFs against large funds, you will see that the performance of most common band ($200k-$500K) is somewhat worse than the large funds average for years 2010, 2011, 2012, much the same for 2008 and SMSFs are better in 2009 – overall, the performance of the large funds over the 5 year period is considerably superior. All bands below the $200K -$500K band perform much worse than large funds, the $500K -$1M band looks like it is neck and neck, in the bands $1M-$2M and >$2m SMSFs perform better than the large funds.

    The other interesting data is the very low level of overseas investments in SMSFs. The period covered by the report is one where returns from overseas equities were somewhat lower than Australian equities and featured a rising dollar. We are now in a period where overseas equities are outperforming Australian equities and the Australian dollar is falling. Since the majority of large fund members are in the balanced options of funds that have considerably more exposure to overseas equities than SMSFs, it will be interesting to see the comparison in performance in the next ATO report.

    Regards,
    Bob

  3. Wow. 3 out of 5, eh? That wouldn’t have anything to do with ‘chance’? Any guess on what the 2012 results might be, given the tendency for SMSFs to hold cash and property, and the performance of sharemarkets last year?

    I’m willing to guess, and I think large super funds outperformed, which would put average performance at 50/50 by year. In other news, the sky is blue.

    • Looks more like 4 out of 6 by my count ….with an accumulated (but not adjusted , rough I know) gain of 7.5% to the SMFS over the large funds

  4. I manage my own SMSF and over the last 9 years we came in 2nd when compared with the best 25 superfund performers in the country with a 8.5% return per annum. Just because some SMSF’s dont get it right, dont penalise the ones that do with more regulations.

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