Cash still king for SMSFs

Cash remains king for the trustees of self-managed superannuation funds (SMSFs) according to new research released by Investment Trends.

The research, released today, reveals that SMSFs are still holding more than one fifth of their assets in cash and cash products.

The Investment Trends 2010 SMSF Investor Report, based on a survey of more than 1,900 SMSFs, has revealed that while there has been some recent reversal of the flight to cash that occurred during the global financial crisis, allocations still remain high.

The research found that between 2007 and 2009 the typical SMSF trustees’ allocation to cash and cash products almost doubled, growing from 13 per cent to 24 per cent, but that this declined this year to 21 per cent.

However Investment Trends analyst Recep Peker said the research showed that, largely due to market volatility, 70 per cent of SMSF trustees were holding excess funds in cash that they would have otherwise invested.

He said “this excess cash war chest” stood at $34 billion in April, representing around 8.5 per cent of total SMSF assets.

The Investment Trends research said a lack of confidence in the economy and the stock market had been the main factor deterring SMSF trustees from investing their excess cash.

The research found that while some trustees had begun investing their excess cash reserves, many trustees were delaying such a move until they perceived a sustained rise in asset values.