It’s a legal requirement to create and implement an investment strategy for your fund which considers each member’s circumstances.
Consider using a licensed financial advisor to assist you in preparing, reviewing, and updating your fund’s investment strategy. They can also advise you on the types of investments and insurance to consider and help make sure your investments comply with the law.
Your investment strategy is a plan for making, holding, and realising assets consistent with your investment objectives and the members’ retirement goals. It should be in writing and set out why and how you’ve chosen to invest your members’ retirement benefits to meet these goals. You should also document decisions or changes you make during a review.
The strategy needs to reflect the purpose and circumstances of your fund and should consider:
- diversification, such as investing in a range of different assets and asset classes to lower your portfolio's risk and help get more stable returns
- risk and likely return from investments, to maximise member returns
- liquidity of fund assets, ensuring the fund can pay expenses as well as benefits when members retire or die
- whether to hold insurance cover for each member and any assets (if applicable) of your SMSF
- members’ needs and circumstances, appetite for risk and when members plan to retire (for example, age, income level, employment pattern and retirement needs).
If your fund invests in overseas property there are a number of things to consider, including:
- the laws of the country and whether a foreign entity (such as an SMSF) can own the property
- some countries don’t have a property register so it’s more difficult to prove the SMSF owns the overseas property and that it’s not used for security over another asset
- double-taxation treaties where the SMSF is required to pay taxes and lodge tax returns where the property is located
- risks around fluctuations in foreign currency exchange rates
- sovereign risk – which is the risk of a foreign country changing its rules for foreign investors or taxation.
Seek professional advice if your fund is considering investing in overseas property.
