Behavioural factors in SMSF asset allocation

A report prepared by the SMSF Centre of Excellence, in collaboration with SuperConcepts and the International Centre for Financial Services, University of Adelaide.

Introduction

SMSFs primarily invest in three asset classes – cash, domestic shares and direct property. Commentators often suggest that home bias – a behavioural trait of investors who disproportionately prefer more familiar domestic assets – is responsible for the lack of international asset holdings in SMSFs. Bias may also be responsible for the larger cash holdings, as SMSFs prefer to re-invest investment income into cash, forgoing potentially greater growth if the income were to be invested in other asset classes.

This report aims to investigate some behavioural factors that contribute to the asset allocation decisions of SMSFs. Regulators and advisors can benefit from the identification of these behavioural factors by providing education and/or training to trustees to overcome these biases.

 

(Click on the cover page image for the full document).

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