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Insight: SMSF

After years of below-par sharemarket returns, it's hardly surprising more people want to manage their own superannuation.

Self-managed super offers lower fees while allowing investors to choose the types of assets with which they're comfortable.

So where have the 440,000 self-managed funds tended to invest? And are their strategies paying off?

While every fund is different, the aggregate figures reveal stark differences between members of a regulated fund and those who choose to go it alone.

For one, people who manage their own super are far more keen on the Australian sharemarket, where they typically park 40 per cent of their retirement savings. International shares play a negligible role.

Regulated funds, in contrast, tend to put between 25 per cent and 35 per cent of their assets into local shares, plus another 20 per cent into international shares.


Self-managed funds also favour cash, which accounts for almost almost 30 per cent of assets, far ahead of the 10 per cent to 15 per cent allocation preferred by regulated funds.

How has this strategy worked out for the $440 billion self-managed sector?

On the whole, analysts say returns have been reasonable, if not spectacular. Cash has performed well, and this has tended to offset the sharemarket slump, leaving self-managed funds in similar shape to the rest.

The head of research at Rainmaker, Alex Dunnin, says self-managed funds have returned an average of 6 per cent in the past three years, a touch more than retail funds and slightly behind the non-profit sector.

Some self-managed funds have hit the jackpot by picking hot stocks or sectors, of course. But Dunnin says there's no evidence this is more likely to occur in the self-managed sector.

Where self-managed funds have a clear advantage is their cost. On average, it's 0.8 per cent of funds under management, compared with 1.26 per cent for other funds.

However, that also needs to be put in perspective. ''You don't retire on low costs; you retire on money which you get from good returns,'' Dunnin says.

As billions more are poured into self-managed funds and advisers eye this booming market, it's a message worth bearing in mind.