Over-confident males make SMSFs riskier

If you want to add risk to your superannuation savings let the men take over, says a new study due out this week.

A new study has found that gender has a significant impact on investment decisions.

If you want to add risk to your superannuation savings, let the men take over! That’s the message from a comprehensive University of Adelaide report to be released later this week which finds gender has a significant impact on investment decisions.

In fact the report — which delves into the behaviour of more than 20,000 SMSF funds across Australia — says men will not only push a fund up the risk spectrum but ‘males tend to have unsupported confidence in their intuitive reasoning, judgments and cognitive abilities.”

Whether this risk-taking behaviour from the men actually backfires on the nation’s estimated 1 million SMSF fund members remains unanswered; “That’s a question we will have to tackle in the future’” says Ralf Zurbrugg chair of finance at the University of Adelaide, which based its report on data from SMSF services provider SuperConcepts.

“Gender bias leads funds to invest in risky assets when they are comprised of more male trustees’ says the report … we find that SMSFs with more male trustees have smaller holdings of cash (a relatively riskless asset) but greater holdings of risky assets (domestic shares are property investment).”

The report adds some much needed colour to the profile and disposition of SMSFs across Australia, which now represent the single most important group in dollar terms within the superannuation sector.

Interestingly, the men who may be lifting risk settings in the average superfund are also going to be older — not retired but not far from it: The average age of a trustee sits at 61 says the report.

Usefully, the survey also gives us an insight into the size of funds across the DIY landscape, splitting the sector into four classes: 1. Small funds of less than $200,000; 2. Medium-low funds at $200,000 to $500,000; 3. Medium-high funds at $500,001 to $1,000,000 and funds of $1 million or more.

In terms of allocation, the report found that over the last decade cash holdings dropped substantially from 23 per cent to 15 per cent as money clearly moved into property, which lifted from 14 per cent to 16 per cent along with a lift in overseas and alternative (other) investments.

Though the property allocation has increased, the survey does take the entire value of properties held in super funds into its assessment, though the existence of mortgages may conceal much lower levels of actual equity in these allocations.

Curiously, the report also found that the bigger a fund became in terms of the number of trustees in the fund, the more conservative it became: This balance in the larger funds was due to the fact that larger funds allocate their investments across a greater number of asset classes relative to smaller funds.

Historical surveys of investment behaviour have regularly concluded that males are bigger risk takers than females — the University of Adelaide report is one of the first to deal with the issue in the local market.