Traditional defensive assets, such as cash and bonds, are useful for mitigating risk and generating income in self-managed superannuation fund portfolios. This is vital given the current volatility of financial markets.
“It’s important to have defensive assets to provide a stable income and liquidity, so the investment can be easily accessed,” says Industry Fund Services head of technical services and advice enablement Craig Sankey.
SMSFs with members approaching retirement commonly increase their defensive exposure to ensure they can pay pensions and protect the fund from capital losses. The challenge is that managing risk by including defensive investments comes at a cost to returns.
Cash and term deposits are the most popular defensive investments held by SMSFs. However, Sankey suggests SMSFs look beyond the traditional asset classes. “These days there are more opportunities for alternative types of defensives: assets like unlisted property and infrastructure that have growth and defensive characteristics,” he says.
Hostplus Self-Managed Invest provides investors access to exclusive unlisted investments, including domestic and international property, infrastructure and private equity, with daily liquidity.
Hostplus’ SMI Property option has performed well recently,* returning 18.75% for the 12 months to 30 April 2022 but with a heavy defensive mix of 70%. SMI Infrastructure delivered a 11.03% rolling one year return during the same timeframe and has 40% of its assets classed as defensive.
“Returns [from defensive assets] are not highly correlated with financial markets and are less volatile than financial markets. Those are the characteristics that someone wants in their portfolio as they approach retirement,” says IFM Investors chief economist Alex Joiner.
Hostplus’ SMI options can provide SMSF investors a highly diversified portfolio that delivers growth and income for a better future through access to unique assets classes unavailable elsewhere.
For more information about SMI options please contact on 1300 350 819.
*Past performance is no indication of future returns.
The information in this article is correct as at the time of publication.