Why non-traditional asset classes have a role in SMSF portfolios

Diversity is key for our self-managed super fund (SMSF) clients – from both a risk and a reward perspective. But what should that look like in practice?

When we talk about non-traditional asset classes, we’re referring to those assets that sit outside your regular equity, fixed income and cash. Typically used by institutional investors, they have a low correlation to the share market and are often privately owned and highly illiquid. Some, such as hedge funds, operate in the public markets but employ less conventional tools like short-selling and leverage.

Non-traditional assets fall into many categories, but some of the more common ones are:

• private equity
• venture capital
• commercial property
• infrastructure
• commodities
• hedge funds.

It’s not just their low correlation with traditional markets that makes them attractive. Many of these assets offer long-term attributes that better reflect the investment goals of many SMSFs. They also tend to be high on the risk spectrum, providing opportunity for enhanced returns and, in some cases, high income. Real estate and infrastructure assets can also act as a hedge against inflation, as the underlying contracts for income are often linked to rising prices.

So why do advisers tend to overlook these non-traditional assets?

Illiquidity, and the perception that they’re notoriously difficult to access, play a big part.

However, Hostplus' Self-Managed Invest (SMI), an award-winning SMSF offering¹ which overcomes both these issues, provides access to non-traditional assets while maintaining liquidity.

Hostplus SMI can provide your clients with access to an array of listed and unlisted investments, which can include:

• unlisted Australian and global infrastructure
• institutional-grade domestic and international property
• commercial and industrial sectors
• private equity investments.

Hostplus SMI presents a great opportunity for advisers and clients. It allows you to build a portfolio of investments with long-term investment strategies, that provide little to no correlation with the share market.

At the same time, access and liquidity are possible due to the SMI options investing through Hostplus’ Pooled Superannuation Trust structure. This means your clients benefit from their money being pooled with more than one million Hostplus members, while maintaining their own units within their chosen investment option.

Not only will your clients have access to unique assets, but you and your clients will benefit from the online functionality to apply for and manage the investments including the ability to switch options and request withdrawals, as well as having access to meaningful reports and ongoing support.

As your clients' adviser, you have the understanding and knowledge to consider the investment options that best suit your clients.

Hostplus SMI provides a diversified range of pre-mixed and sector-specific options, including:

• Hostplus Balanced
• Hostplus Index Balanced
• Hostplus Property
• Hostplus Infrastructure
• Hostplus Australian Shares - Indexed
• Hostplus Diversified Fixed Interest - Indexed
• Hostplus International Shares - Emerging Markets
• Hostplus Capital Stable
• Hostplus Conservative Balanced
• Hostplus Socially Responsible Investment (SRI) - Balanced.

Our team can help you understand the attributes of each option so that you can incorporate assets that complement your clients’ existing portfolios, while taking into account their risk appetites and financial goals.

Ultimately, by tapping into the accessibility, flexibility and liquidity of Hostplus SMI – and taking the time to understand your SMSF clients’ needs and goals – you can help them build a strong and diversified investment portfolio that aims to set them up for future success.

To find out more about how Hostplus SMI can help you and your clients, contact us on 1300 350 819. Our insights and resources can help you make confident decisions for your clients – their fund, their future and their finances.