Self managed super funds

International shares

International shares offer SMSFs the opportunity to diversify their portfolios and take advantage of undervalued or favourable conditions in other markets.

While international shares represent less than 1% of all SMSF assets, they offer a much larger and broader opportunity set than domestic shares. This is because the Australian market:

• represents only 2% of world market capitalisation
• is dominated by banks and mining companies, and
• has few companies in industries such as Technology and Healthcare

Including global shares in your fund’s portfolio can also:

• reduce the reliance on the fortunes of the Australian economy, and
• increase diversification, as not all world share markets increase or decrease in value at the same time.

Cash

Cash, including term deposits, is a core requirement for cash flow management and plays an important role in overall SMSF investment strategies. As one of the most widely held asset classes, cash gives Trustees the ability to:

• earn interest while maintaining easy access to funds for future investment opportunities
• receive all cash inflows (e.g. contributions and earnings from the fund’s investments) and pay all outgoings (e.g. fund expenses and member benefits where a release condition has been met). This is often referred to as providing the ‘cash hub’, and
• hold the cash component of the fund’s investment strategy.

Investment lending

SMSFs can borrow to invest by using what is known as a “limited recourse borrowing arrangement” (LRBA). To establish an LRBA, your SMSF will need to take out a loan with a lender and invest the borrowed money and some cash already in your fund in what’s called a “security trust”.

Investment lending enables you to amplify your investment power by giving you the opportunity to borrow against your assets to invest more and, hopefully, improve your portfolio performance.

We’ve created a product specifically to help SMSFs boost their investment power. NAB Super Lever offers SMSFs:

• A broad range of listed securities and managed funds to borrow against
• Start with a small initial investment
• Personal service and online access
• The ability to monitor your NAB Equity Lending facility through our online platform nabtrade
• Access to a dedicated Relationship Manager

Find out more about NAB Super Lever at nabmarginlending.com.au

Fixed income

Fixed income can play an important role in a diversified and balanced portfolio, as well as providing you a stable income in retirement. nabtrade enables SMSF trustees to access a wide variety of fixed income products providing them:

• Increased diversification and reduced portfolio risk 
• Capital preservation in times of economic downturn / leading up to retirement when certainty is important
• Provide a consistent cash flow – important in retirement
• Reduced asset risk to capital as a result of the company failing as the fixed income products have a higher position in the capital structure. 

Learn more about Fixed income.

Capital raising

Companies may choose to raise capital through the issue of new shares or debt. To raise capital, companies can access a large pool of investors and obtain funding for activities including expansion of business operations, acquisitions or to improve balance sheet strength.

If a company is looking to raise equity capital they may consider an Initial Public Offering (IPO). An IPO is undertaken when a company raises capital prior to listing on the Australian Securities Exchange (ASX).

Another example of capital raisings are hybrid securities, which are a combination of debt and equity, typically issued by banks. To find out more about hybrid securities, watch our Hybrids 101 video.