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Does your SMSF investment strategy meet diversification requirements?

The ATO has recently identified that a small percentage of self-managed super fund (SMSF) trustees could be placing their SMSF at unnecessary risk, by holding 90% or more of its funds in one asset or a single asset class.

While these concerns only apply to a small percentage of SMSF’s, it is important that SMSF trustees understand their obligations in relation to diversification requirements and investment strategies.

What do you need to know?

A well-diversified SMSF investment strategy spreads investments across asset classes and markets so that if one area underperforms, the others will still provide earnings or capital growth.

SMSF Trustees are required under the Superannuation Industry (Supervision) Act 1993, to formulate and regularly review their investment strategy, clearly documenting the reasons behind their investment decisions.

An SMSF investment strategy considers:

  • The overall composition of the fund’s investments and their diversification
  • The risk involved in making investments and their likely return
  • The personal circumstances of all the fund members, including their age, retirement needs, and risk tolerance
  • The liquidity of your investments, meaning the fund’s ability to pay benefits when members retire and other costs it incurs
  • Insurance requirements for each member (such as life cover).

What do you need to do?

If you are concerned about your fund’s compliance or have questions about your SMSF investment strategy please contact us today.

At Partners Wealth Group our team of SMSF specialists can help you to review and document your SMSF investment strategy, ensuring it meets diversification requirements.

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