Size matters when it comes to the investment performance of self-managed super funds (SMSFs), but not as much as we’ve been led to believe.
The latest research shows investment returns of SMSFs with a balance of $200,000 or more are comparable to returns from much larger funds regulated by the Australian Prudential Regulation Authority (APRA), with several provisos.
To compete with the big end of town, SMSFs must be well diversified and not hold too much cash. SMSFs that use an adviser also have an edge over their non-advised peers.
That said, SMSFs tend to outperform APRA funds in depressed markets and underperform in good years. More on this later.
A report titled Self-managed Super Fund Performance 2022–23 (the Report) conducted by the University of Adelaide for the SMSF Association analysed returns from over 421,000 SMSFs in the 2023 financial year. This represents almost 70% of the entire SMSF population.
The Report builds on earlier work by the same researchers on SMSF performance over the period 2017–22. Their ongoing findings have been instrumental in debunking the once-common assumption that SMSFs with less than $500,000 in assets generally underperform APRA-regulated funds.
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