Right now in the Australian market, one of the most important pools of money is the more than half a trillion dollars in retirement funds that people are managing themselves.
Self-managed super funds have become so big and so hungry for dividends that they are having an impact on the Australian equities market.
They already control one-third of Australian pension assets and a massive 16% of the Australian equity market.
New numbers from the ATO suggest self managed super funds will continue to have a growing slice of Australian shares.
The funds have, since 2004-05, channelled $121 billion into the Australian equity market, which represents about one-third of all new net equity issued.
For the year just ended, a net $11.4 billion went from self-managed super funds into the Australian share market.
“There is not a single Aussie investor that comes close to being this influential,” says Hasan Tevfik, director of Australian equities research at Credit Suisse, who has taken to referring to do-it-yourself retirement funds as “Selfies”.
He believes these funds will continue to increase their influence on the share market. “We expect them to be net buyers of about $1 billion of Aussie equities per month for the next 24 months,” he says in a research note.
The ATO numbers to the end of June 30 this year show self-managed super funds now control $557 billion in assets, and $229 billion of it is in Australian equities, either in direct shares or indirectly through managed funds.
And the self managed funds are holding an increasingly bigger slice of their total assets in shares. Currently, they have 43% of their portfolios in equities, and this is rising, and 28% in cash, and this is falling, as these charts show. Note the somewhat alarming title on the chart to the left.
Investment in property is edging higher with $128 billion invested which makes up 23% of total assets.
But it is the increasing flows of cash into Australian domestic listed companies which is having an impact on the market.
“We forecast Selfies (SMSFs) will be net buyers of $24 billion worth of Aussie equities over the next two years,” he Tevfik says. They have bought $17 billion over the past two years.
Working out what Selfies will buy next is a good way to ride the trend.
“Investors should consider where Selfie dollars may go,” he said.
“Stocks that may be attractive to Selfies now include high dividend yielders and strong dividend growers like Myer, Tabcorp and Macquarie Group.
“Stocks that Selfies may buy in the future, but probably don’t own now, include Caltex and iiNet.”
The companies in the chart below currently provide an average gross dividend yield of 2.6%, but are forecast to more than double to 6.5% in 24 months.
Here are Hasan Tevfik’s picks for the next companies to be targeted by Selfies.