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Equity markets continue to defy expectations, but investors face mounting risks as valuations stretch to historical extremes. Hugh Selby-Smith, co-CIO of Talaria Capital, recently presented his insights at The Inside Network’s Alternatives Symposium, warning that today’s market environment demands a critical reassessment of diversification strategies.
Close your eyes, relax and enjoy the wealth
Whether you feel it personally or not, Australia is filthy rich. But you can do anything with statistics.
New figures from UBS show that household wealth in Australia has reached a record-high $17.2 trillion this year (as at February), up $950 billion, or 6 per cent, over the past year. It’s one of the highest figures in the world.
Our on-paper wealth is still dominated by our castles: Australian residential property market is worth $11.1 trillion, accounting for about 64 per cent of total household wealth (that figure dwarfs the $2.3 trillion of outstanding mortgages against all residential housing.)
But it also incorporates the burgeoning Australian superannuation industry. UBS found that total retirement assets – including super and SMSFs – increased by 11% year-on-year in the fourth quarter of 2024, to a record-high $4.2 trillion. If super and SMSFs continue to grow at this rate, it means their total assets will increase by $1 trillion every two years.
The December-quarter growth in assets was driven by growth in super contributions, as well as robust asset returns. Super inflows exceeded outflows.
APRA-regulated super funds grew assets to $2.9 trillion in December quarter, up 3.1 per cent on the previous quarter and 14 per cent over the prior year. This fund category remains dominated by the industry funds, which represent 51 per cent of total APRA-regulated assets, up from 49.7 per cent in 2023.
SMSF assets finished 2024 at $1.018 trillion, down marginally from $1.024 trillion in the September 2024 quarter, but up 6.1 per cent over the year.
SMSF member numbers still grew. ATO figures show there are now 638,411 SMSFs, a net rise of 8,727 in the December quarter and almost 27,000 over the previous year.
The figures reveal the majority of SMSFs have assets between $500,000 to $5 million (64 per cent), with 23 per cent holding between $200,000 to $500,000.
And while 85 per cent of SMSF members are 45 years or older, the sector — and the vehicle — have struck a chord with younger people.
The latest Benchmark Report from specialist administration software provider, Class Super shows that after decades of dominance by the ‘baby boomers’ it is now Millennials and Generation X who are driving SMSF establishment. (Generation X is generally defined as those born between 1965 and 1980, following the Baby Boomers and preceding the Millennials: Gen Xers are currently aged 45–60. Millennials are those born between 1981 and 1996, currently aged 29–44.)
The Benchmark Report revealed that Generation X (51.9 per cent) and Millennials (33.6 per cent) collectively drove more than 85 per cent of new fund establishments for the six months to 31 December 2024. Millennial establishments grew at a faster rate than any other demographic, increasing by almost five percentage points over the past six months.
The same report has also revealed that more than three-quarters of the SMSFs were unadvised.
As for where SMSFs are investing their money, listed shares still dominate at 27 per cent of total assets, followed by cash and deposits at 16 per cent, unlisted trusts at 13 per cent and commercial property at 11 per cent.
The figures concur with a recent University of Adelaide study which found that a lack of exposure to overshares shares, especially US tech, had cost SMSFs in recent years.
The problem of large cash holdings and the small allocation to international shares — just 2 per cent outright, although some additional exposure would be captured in the listed trusts (6 per cent) and unlisted trusts (13 per cent) allocations — remains a characterising trait of SMSFs.
