Why Indices Matter to SMSF Trustees

I spent a recent weekend at the Self-Managed Superannuation Fund (SMSF) Expo talking to SMSF trustees about indices. While I often spend Monday through Friday talking indices, to spend Saturday and Sunday chatting about indices was something new. The SMSF Association hosted the first SMSF Expo in Australia, attracting over 1,500 people over the three-day Expo. SMSFs represent about one-third (or AUD 721 billion) of Australia’s total superannuation asset pool of AUD 2.3 trillion, as of Dec. 31 2017.[1] These funds enjoy much greater flexibility in terms of investment choices, including the ability to borrow and leverage. There are over 1.24 million SMSF trustees in Australia.

The most common question asked of me at the Expo was, “What does S&P Dow Jones Indices offer to SMSF Trustees?” My answer was that we primarily give away education, and from that point, I launched into sharing the findings from our SPIVA® Australia Year-End 2017 Scorecard, as well as the findings from the Persistence of Australian Active Funds: March 2018. With SPIVA, I always find it helpful to start with the infographic that shows the SPIVA phenomenon is not just something that occurs in Australia, but that in many markets, active managers find it hard to outperform their respective benchmarks.

After sharing the SPIVA and persistence findings, it was an easy segue to handing a trustee the ticker sheet of all ETFs in Australia and New Zealand that track an S&P DJI index. Armed with the research and ticker sheets, trustees who had not as yet invested in ETFs were then in a position to consider how these vehicles could form part of their portfolios.

But it wasn’t only SMSF trustees who attended the Expo. There were also financial advisers, many of whom are converts to the ETF cause, but had never met anyone from an index provider and were thrilled to know that there are myriad resources available to share with clients. It’s always satisfying to talk to advisers and trustees who advocate passive investing, but the real thrill at events of this nature is when you are explaining passive investing and indexing, sharing SPIVA or persistence results, and you see the dawn of realization on the faces of the people you are speaking with as they get why passive investing is growing and how easy it is for them to access passive investment vehicles.

[1]   Source: APRA, Quarterly Superannuation Performance December 2017

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