Q&A: Do SMSFs perform better than industry funds?

Q: Do any SMSFs make greater returns than industry funds, generally speaking?

A: This is a difficult one to answer. And the reason it’s difficult to answer is that when we’re comparing something, when we’re comparing, for instance, the performance of an industry fund to the performance of a self-managed super fund, we’re not comparing like for like. We’re not comparing, as the saying goes, apples with apples. We’re comparing two very different things.

The asset allocations that you would see within a pool of SMSFs. So if you looked at all the SMSFs that exists in Australia, the asset allocations within each vary considerably from fund to fund. Those asset allocations, the way that we invest our money through SMSFs is highly unlikely to look anything like what you would see in the industry funds that you’re asking us to compare. So it’s not really a fair comparison. That’s when you look at, for instance, a pool of SMSFs to industry funds.

If you then go one step further, you need to look at each SMSF and its performance varies considerably from fund to fund. And as you can see from the two graphics that I’ve put up for you there, you’ll see that the returns for SMSFs vary greatly from year to year and also from fund to fund. So it’s probably best to look at, for instance, a median of funds if that’s the way to do it, which is the left hand bar chart that you’ll see there.

Again, these have been sourced directly from the ATO’s website. If you want to have a look at different performance measures, you can certainly jump onto the website and go to the performance area. But you’ll see there, across the last four or five years, you’ll see the total returns, but more importantly, the median return on assets.

The right hand side breaks that up into, for instance, different types of funds. You’ll see there that in the top line, the SMSF population, so the funds that recorded a zero or negative return on assets for 2021 was 15.2% compared to 60% the prior year. If you look at funds with a return on assets with greater than 5%, well, last year, I shouldn’t say last year, it was actually the year before, but it’s the most up to date information, was about 72 % versus 16.8 % of the year prior.

So what I suppose I’m trying to put across here is that we can’t really compare an industry fund to an SMSF. The asset allocation and the assets being held very considerably, but this is the answer to your question. It’s based on the fact here.

Yes, some SMSFs do outperform, many don’t. So have a look and compare that if you wish to the ATO information. I’ve then just included here the December 2021 Chant West super fund performance, so you can see how that might compare. But again, when you’re looking at this slide, it’s broken up into five very different style funds. The growth or income style fund and its performance varies considerably.

I just wanted to include that one for our reader because it was a question which came through. Please have a look at that further. I hope it does give you some information. If it doesn’t, you can, of course, jump onto the website there. You’ll see there’s a whole heap of information around fun performance on a monthly basis and a five year basis on a financial year or a calendar year. All of that information can then be reviewed and applied to what it is you’re actually looking for.