Self-managed super funds guided by advisers have re-emerged as a distinct force in the Australian market since the pandemic, driving growth in account numbers, overtaking self-directed SMSFs by new account openings after a surge in DIY SMSFs in 2021 and showing more engagement in their trading than non-advised SMSFs, according to new AUSIEX data.

Advised SMSFs have also developed distinct investing identities, with a greater propensity for buying and selling exchange traded funds (ETFs), Australian Real Estate Investment Trusts (A-REITs), hybrid securities and exchange-traded physical commodities than non-advised SMSFs and non-SMSF accounts.

The trends are the latest to emerge in a continuing series from AUSIEX tracking the ongoing transformation of Australian equity market investing and highlights activity from January 2021 through to mid-February 2022. During this period when markets were convulsed by a sell-off in US tech stocks amid fears of higher inflation, geopolitical uncertainty owing to the tensions in Ukraine and the prospect of multiple interest rate increases. Despite the volatility, AUSIEX account holders held their nerve and were net buyers through the broader market sell-off, the data shows.

Changing face of investors

The surge in new SMSF trading account openings that coincided with pandemic lockdowns has levelled out as the country returns to normal patterns of work. But it has left an altered landscape.

Younger and female investors are responsible for a growing number of account openings. The proportion of Millennial Advised SMSF clients has quadrupled in the past decade while the average age of someone opening a new SMSF account is down from 67 in 2012 to 59 in 2022.

Women accounted for one in three account openings in the first six weeks of 2022, up from one in four across 2021 and one in five in 2020.

SMSF accounts are also more engaged with respect to their trading. From the time the account is opened, the number of days to first trade has plunged from 180 days 10 years ago to just 11 days in 2022. 

Growing with interest in advice

AUSIEX is one of Australia's leading providers of wholesale trading solutions and serves a significant proportion of Australia's total SMSF market. The Advised book is 51.3% of all SMSF accounts, the self-directed segment makes up 43.9%, and the remaining 4.8% belong to Advised wrap platform accounts.

AUSIEX has seen SMSF account numbers increase 5.1% since the start of the 2021 calendar year. While self-directed SMSF account openings surged in the first four months of the pandemic (March-June 2020), Advised SMSFs have since rebounded strongly to become the leading source of new SMSF account openings, including a spike in September 2021.

Men account for 79% of primary SMSF account holders and women 21%. But that headline number masks significant differences across the different types of accounts. Women are 19% of advised accounts, nearly 21% of Advised Wrap clients and 25.4% of self-directed accounts.

AUSIEX CEO Eric Blewitt said the figures appeared to highlight the effects of post-pandemic recovery.

“Self-directed investors who not long ago had the time to set up and manage the compliance obligations and direct their investments, may be finding themselves facing both challenging investment conditions and being time poor. Consequently, they may now be again seeing the value in and actively seeking professional advice,” he said.

Buying the dip

Interestingly, the market rout in January and February drew some new investor interest. AUSIEX accounts were net buyers through January with SMSF accounts averaging 57% buys, rising to 60% as the rout extended into February.

The buy-sell ratio over that first six weeks of 2022 was 1.34:1, meaning that for every 10 seller SMSF accounts, there were nearly 14 buyer accounts.

“By and large, SMSF investors are optimistic,” Mr Blewitt said. “They are net buyers through the market cycles and are prepared to hold their nerve in the face of dramatic local and global developments, such as a rout in tech stocks and the first increases in official interest rates. They are willing to look outside the local market and conventional options to play bigger themes that drive investment returns.”

Materials preference

Trading activity is usually focused on Australia’s two heavyweight sectors: Resources and Financial Services. Through the first weeks of 2022, the dominance of those two sectors was even more pronounced as miners such as BHP (ASX: BHP) and Fortescue Metals Group (ASX: FMG) accounted for 29.65% of total trades and Financials such as Commonwealth Bank of Australia (ASX: CBA) and Magellan Financial Group (ASX: MFG) represented 21.95% of the total.

Healthcare and Information Technology stocks were the next most actively traded sectors with 7.47% and 7.21% respectively of total trades. ETFs, with 5.36% of total trades since the start of the year, vied with Energy and Consumer Discretionary stocks as the next most popular sector.

SMSF investors were net buyers across all but two sectors. Sellers dominated buyers for Utilities and Hybrids, while Energy stocks were about evenly split with buyers accounting for just 51.5% of trades.

The buy trend was strongest for A-REITs at 74.77%. A-REITs were followed by Exchange Traded Products (ETP – which includes Active ETFs and Exchange Traded Managed Funds) at 72.3%, although their share of total trading activity is significantly lower. Around two in three trades for Healthcare, Consumer Discretionary ETFs and Consumer Staples were buys.

Trading data also shows AUSIEX clients have been prepared to venture outside the mainstream into new economy themes such as battery technology and the metaverse. Artificial intelligence chip maker Brainchip (ASX: BRN) and battery materials and technology maker Novonix (ASX: NVX) are among the stocks that have topped trading activity since the start of this year.

ETFs find favour

Highlighting their growing acceptance by investors, ETFs were the eighth most popular sector in the opening weeks of 2022 as nearly one in seven SMSF accounts traded them, but the difference between clients was stark. More than 1 in 5 Advised SMSF investors (21.8%) traded ETFs, compared to just 1 in 14 (7%) of self-directed SMSF clients.

Clients that traded through an advised wrap platform showed the strongest preference, with 27.5% trading ETFs.

While some more exotic thematic fund launches in recent years have helped generate continuing interest, most of the activity came from what might be called core holdings. Through 2021, the top six ETF strategies by dollar value traded accounted for 75-80% of all ETF trades for the SMSF segment, including Australian equity, fixed income and US and international shares.

As tech shares sold off heavily in January and February 2022, the BetaShares Nasdaq 100 ETF (ASX: NDQ) was the most traded ETF for SMSF investors, climbing from seventh spot and overtaking Vanguards’ Australian Property Securities Index ETF (ASX: VAP). Then came the thematic ETFs, including BetaShares Global Cybersecurity ETF (ASX: HACK) ETF Securities Battery Tech and Lithium ETF (ASX: ACDC) and BetaShares Global Sustainability Leaders ETF (ASX: ETHI).

Mr Blewitt said that the Advised SMSF segment shows clear investment preferences.

“Advised clients are a distinct group within SMSF accounts and have regained ascendancy over new self-directed SMSF accounts in the second half of 2021. Advised SMSF clients are far more likely than self-directed SMSF clients to trade ETFs and are also more bullish on A-REITs, hybrids and exchange-traded physical commodities.”

As markets are tested by Russia’s invasion of Ukraine and central banks’ efforts to check inflation with rising interest rates, those investor preferences are sure to shift again this year.

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