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Think like a Professional Fund Manager

According to this article “Small Funds now Biggest Sector of Super Industry” in The Australian newspaper, Self Managed Super Funds have become the biggest sector in the Superannuation industry since October 2008.  As mentioned in a speech by the Deputy Commission of Taxation in a SMSF conference in February 2009, funds invested in the sector is around $348 billion or 31% of total super funds and that equates to nearly twice the market capitalisation of the top 5 banks put together!

As a group, SMSF trustees control a staggering amount of money and we should start thinking like professional fund managers rather than as “mum and dad” retail investors. I took a look at the Education for Professionals section on the ASX website and I found this Fund Manager Education document for Australian Equity Fund Managers. Most of the presentations mentioned in this document are about using options to hedge risk and to generate additional income, which sound very much like what I have been doing for my SMSF and what I have been talking about on this blog.

Just knowing this has certainly boosted my confidence in my own investment management capabilities. I used to think that all professional fund managers would surely be more knowledgeable than me but if the ASX still needs to educate some of them on what I already know, that may not necessarily be the case. My suspicions have been further confirmed by this article “Aussie Super funds are Among the Worst” in the Herald Sun, which tells us that a report released by the Organisation for Economic Co-operation and Development (OECD) last week showed that Australian super funds turned in the second-worst performance of all 30 OECD countries, suffering losses of almost 27 per cent last year. I am really glad we decided to take control of our super savings by starting our own SMSF in 2007. Instead of losses, we are expecting a positive return for the last financial year.

I hope I have convinced any remaining skeptics about the usefulness of options in managing risk if you manage a stock portfolio. For more information about education on options, please visit my Resources Page. Unfortunately, there is not much free education on Australian options available. I plan to fill this “gap” by develop some free educational videos on how to get started with options in Australia so stay tuned to updates in this blog.

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