Amidst unprecedented volatility, traditional asset classes have failed to deliver the necessary combination of wealth preservation and yield that self-managed super funds (SMSFs) seek, according to the founders of investment platform provider, Stropro.
Stropro enables its clients to access Structured Products, tactical investments that could be the missing ingredient in SMSF portfolios.
Recent figures from the Australian Taxation Office (ATO) show the largest 100 SMSFs in Australia have invested more than $1 billion into leveraged residential and commercial property investments.
Meanwhile, Australia’s high net worth (HNW) investors have between 30% to 55% of their total wealth invested in Australian and international equities, according to Anto Joseph, CEO of Stropro.
Mr Joseph worked with HNW investors for seven years at Citi, where he noticed that SMSFs havealways preferred traditional asset classes.
“Equities have experienced a sharp downturn in recent months, eroding the wealth of many Australian investors. Dividend income is no longer a certainty. As a result, SMSF investors are finding themselves in a very difficult position,” he said.
“Property, equities, and cash have dominated SMSF portfolios. Only in the last five to 10 years have SMSF investors started to consider other options like ETFs for a passive, low cost approach, or hybrids to diversify their holdings.”
“The problem for SMSF investors is the difficulty of generating returns while preserving their wealth. Traditional portfolio construction has not prioritised income certainty or capital protection”.
Moving up the risk curve
Driven by the search for yield, Australian investors have increased their allocation to higher risk and poor-quality listed assets.
Ben Streater, former Head of Investments at Citi and Chief Product Officer at Stropro, said the low interest rate environment has driven SMSF investors further up the risk curve.
“Unfortunately, investors are beginning to understand that asset concentration is a risk to their portfolios. The current downturn has left them very exposed. We are focused on providing SMSF investors access to structured products that diversify exposure to asset classes and preserve wealth while generating greater certainty of returns”.
The fintech solution for SMSFs
Stropro has launched an innovative investment platform for structured products. Until now Structured Products been restricted to private bank clients & institutional investors.
US tech giant Microsoft recently accepted Stropro into its flagship startups program.
“We are impressed with this innovative solution, delivered in a short amount of time,” Fiona Simms, ISV Director at Microsoft Australia said.
“It demonstrates a deep understanding of the market and has real potential to scale. We look forward to supporting the team at Stropro as part of our partnership.”
Mr Streater said the platform provides enhanced transparency on structured products issued by global investment banks that are designed specifically for wholesales investors, SMSFs and the sophisticated clients of Australia’s leading financial advisers.
“Stropro went live late last year with its first structured product, issued by Société Générale. It offered a fixed coupon paying 7.5% p.a. The product tracks four of the largest technology companies in the world: Microsoft, Facebook, Apple and Google,” Mr Streater said. “Investors enjoy the fixed quarterly coupon and their capital is at risk if one of the stocks breaches a barrier at maturity. The barrier, set at 35% below the initial share prices, has withstood the volatility during the COVID-19 crisis.”
Stropro is currently in talks with major accounting and wrap platforms as part of its mission to drive greater transparency and efficiency within the structured products industry.
The fintech believes these integrations will improve the investment experience for the SMSF industry.
Reuban Sivarajasignam, Stropro’s Head of Distribution, stressed that Australian investors do not need to take unnecessary risks with their retirement savings to generate an acceptable return.
“All SMSF investors can access Stropro’s education series that informs Australian investors and their advisers about Structured Products, which are a proven investment option offering income certainty and wealth preservation,” he concluded.
Stropro is Australia’s dedicated investment platform for Structured Products. The Stropro platform is available to wholesale and sophisticated clients, financial advisers and family offices. For decades across the globe, high net worth investors have been utilising structured products to enhance income, buffer volatility and increase portfolio diversification. In Australia, these exclusive investment solutions have typically been restricted to private bank and institutional investors, until now. Stropro partners with global investment banks to democratise their capability. Because of these partnerships, our clients benefit from global research and access to exclusive tactical investment opportunities. We look forward to bringing you the benefits of Structured Products from the world’s leading Investment Banks.