Are you feeling stuck in the same old investment routine with your self-managed super fund? Traditional assets like stocks and bonds have their place, but for many SMSF trustees, branching out into non-traditional SMSF assets represents an exciting frontier of opportunity.
Non-traditional SMSF assets encompass a diverse range of investments beyond conventional options. These include direct property investments, cryptocurrencies, infrastructure projects, private equity, and exchange-traded funds (ETFs) with alternative exposures. As market volatility continues and traditional returns face pressure, these alternative investments are gaining popularity among forward-thinking trustees looking to enhance their retirement strategies.
The appeal is clear: these non-traditional SMSF assets offer potential for stronger returns, better diversification, and access to markets and opportunities that mainstream super funds often can’t provide. But like any investment approach, they come with their own set of considerations.
Why Diversification Matters More Than Ever
In today’s economic climate, putting all your retirement eggs in one basket isn’t just risky—it could be financially damaging. Diversification remains one of the most powerful strategies in an SMSF trustee’s toolkit, and non-traditional SMSF assets play a crucial role in creating a truly diverse portfolio.
When your SMSF includes a mix of traditional and non-traditional assets, you gain significant protection against market volatility. Consider this: while Australian shares might be underperforming, your infrastructure investments could be generating steady income. When domestic property markets cool, your international exposures might be heating up.
“Diversification isn’t just about spreading risk—it’s about optimizing opportunities across different economic environments,” explains financial strategists who specialize in SMSF management. By incorporating non-traditional SMSF assets, trustees gain exposure to different economic sectors, geographic regions, and risk profiles that simply aren’t available through conventional investment channels.
Research consistently shows that a well-diversified SMSF portfolio that includes non-traditional assets can deliver more stable long-term performance with reduced volatility. One study indicated that allocating approximately 45% to global investments alongside Australian assets provides the optimal balance of risk, return, and diversification for most SMSF portfolios.
Navigating the Challenges of Alternative Investments
Despite their appeal, non-traditional SMSF assets aren’t without challenges. Understanding these potential hurdles before diving in is essential for trustees considering expanding their investment horizons.
Liquidity Concerns
Unlike publicly traded stocks that can be sold almost instantly, many non-traditional SMSF assets come with significant liquidity constraints. Direct property investments, infrastructure projects, and certain private equity positions can tie up capital for years, potentially creating cash flow challenges if unexpected pension needs arise.
For SMSF trustees approaching or in retirement phase, liquidity becomes particularly crucial. Without careful planning, a portfolio heavy in illiquid non-traditional assets could struggle to fund pension payments, especially as cash reserves diminish—a common issue highlighted by ageing SMSF members.
Accessibility Barriers
Not all non-traditional SMSF assets are readily accessible to every fund. Certain alternative investments require substantial minimum investments or specialized market knowledge. For example, quality infrastructure projects often require multi-million dollar buy-ins, putting them out of reach for many individual SMSFs.
Regulatory Complexities
The regulatory environment surrounding non-traditional SMSF assets can be particularly complex. The ATO’s in-house asset rules, for instance, restrict funds from having more than 5% of their total assets in in-house investments. For business owners looking to leverage their SMSF to invest in their business property, navigating these regulations becomes crucial.
Additionally, SMSF trustees must ensure any investment in non-traditional assets aligns with the fund’s investment strategy document—a legal requirement that must be regularly reviewed and updated to reflect the fund’s approach to diversification and risk management.
5 Non-Traditional SMSF Assets Worth Considering
Now let’s explore five specific non-traditional SMSF assets that could potentially transform your retirement strategy:
1. Commercial Property Investments
While residential property is a common SMSF investment, commercial property offers unique advantages that many trustees overlook. For business owners, the ability to purchase your business premises through your SMSF represents a powerful strategy that mainstream super funds simply cannot offer.
The benefits are compelling: your business pays market-rate rent to your SMSF (providing steady income), you gain control over your business premises, and the property potentially appreciates within the tax-advantaged environment of superannuation.
“Commercial property within an SMSF creates a win-win situation for business owners,” notes property investment specialists. “The business secures long-term premises while the SMSF receives reliable rental income typically higher than residential yields—often between 7-10% compared to residential’s 2-4%.”
However, commercial property investments require careful consideration of vacancy risks, maintenance costs, and financing options. Specialized SMSF loans are available, though they typically come with stricter lending criteria than standard property loans.
2. Cryptocurrency and Digital Assets
Perhaps the most controversial of non-traditional SMSF assets, cryptocurrencies and digital assets have nonetheless found their way into forward-thinking SMSF portfolios. Bitcoin, Ethereum, and other established cryptocurrencies offer exposure to an entirely different asset class that moves independently of traditional markets.
The performance potential is undeniable—despite volatility, Bitcoin has outperformed virtually every traditional asset class over the past decade. For SMSFs with a long-term investment horizon and higher risk tolerance, a small allocation to quality digital assets may provide significant diversification benefits.
Regulatory clarity around cryptocurrency investments in SMSFs has improved, though trustees must ensure proper custody arrangements, valuation procedures, and clear audit trails. Most importantly, trustees should understand the technology and risks before allocating significant portions of their retirement savings to this emerging asset class.
3. Infrastructure Investments
Infrastructure investments—including airports, toll roads, utilities, and telecommunications—offer SMSF trustees access to assets with inflation-protected income streams and essential services that remain in demand regardless of economic conditions.
Traditionally the domain of large institutional investors, infrastructure is now increasingly accessible to SMSFs through specialized funds and platforms. These investments typically provide:
- Steady, often inflation-linked income streams
- Lower correlation to traditional equity markets
- Essential services with predictable demand
- Potential tax advantages through certain investment structures
Infrastructure investments can serve as an excellent hedge against inflation while providing reliable income—particularly valuable for SMSFs in pension phase requiring dependable cash flow.
4. International Direct Equities
While many SMSFs have some international exposure through managed funds, direct investment in international equities represents a more targeted approach to global diversification. With Australian shares representing less than 2% of global market capitalization, expanding beyond our shores opens enormous diversification opportunities.
Technology giants, healthcare innovators, and consumer brands with global reach offer growth potential that simply isn’t available on the ASX. International direct equities also provide a hedge against the Australian dollar and exposure to economies growing at different rates and cycles than our own.
Modern trading platforms have made international shares more accessible than ever for SMSFs, though trustees should remain mindful of currency risks, withholding taxes in various jurisdictions, and the importance of maintaining proper documentation for audit purposes.
5. Alternative Exchange-Traded Funds (ETFs)
ETFs have revolutionized investing by providing low-cost access to diverse asset classes, but the newest generation of alternative ETFs takes this concept further. These specialized instruments allow SMSFs to gain exposure to:
- Commodities and precious metals
- Private equity strategies
- Global real estate investment trusts (REITs)
- Thematic investments (robotics, cybersecurity, clean energy)
- Smart beta and factor-based strategies
Alternative ETFs offer the perfect middle ground for trustees interested in non-traditional SMSF assets but concerned about liquidity or complexity. They provide the diversification benefits of alternatives with the liquidity and transparency of listed securities.
“Rather than focus on a single strategy like income or growth, we recommend SMSF clients diversify across a range of ETFs to gain exposure to different investment factors and asset classes,” suggest investment advisors specializing in SMSF strategies.
Accessing Alternative Assets: The Hostplus SMI Approach
For SMSFs looking to incorporate non-traditional assets but lacking the scale or expertise to invest directly, platforms like Hostplus Self-Managed Invest (SMI) offer an innovative solution.
Hostplus SMI enables SMSF trustees to access the same investment options available to Hostplus’s 1.86 million members, including infrastructure, private equity, and alternatives that would normally be beyond reach for individual SMSFs. This “pooled” approach allows smaller funds to benefit from the scale and negotiating power of one of Australia’s largest super funds.
The platform offers several advantages for SMSFs exploring non-traditional assets:
- Access to institutional-grade investments with lower minimum investment thresholds
- Professional management of complex alternative assets
- Simplified administration and reporting
- Competitive fee structures leveraging Hostplus’s scale
By investing through platforms like Hostplus SMI, SMSF trustees can complement their direct investments with professionally managed exposure to alternatives, creating a more robust and diversified portfolio.
Building a Stronger Retirement Strategy with Non-Traditional Assets
As we’ve explored, non-traditional SMSF assets offer unique opportunities for growth, income, and stability that traditional investments alone may not provide. However, the key to success lies not in abandoning conventional assets but in thoughtfully integrating alternatives within a comprehensive strategy.
At Aries Financial, we believe that empowering SMSF trustees with knowledge about the full spectrum of investment options is essential for maximizing retirement outcomes. Our philosophy centers on integrity, expertise, and empowerment—values that align perfectly with the thoughtful incorporation of non-traditional assets into SMSF portfolios.
Before expanding into alternatives, trustees should:
- Review and update their investment strategy document to reflect their approach to non-traditional assets
- Consider their fund’s liquidity needs, particularly if members are approaching pension phase
- Seek specialized advice on compliance and regulatory requirements
- Start with modest allocations to build familiarity with alternative asset classes
- Maintain proper documentation for audit purposes
The SMSF structure provides unparalleled investment flexibility compared to mainstream super funds—a powerful advantage that shouldn’t be overlooked. By thoughtfully incorporating non-traditional SMSF assets alongside conventional investments, trustees can build more resilient portfolios designed to weather various economic environments while potentially enhancing returns.
As Australia’s trusted SMSF lending specialist, Aries Financial stands ready to support trustees exploring property-based strategies within their SMSFs. Our competitive SMSF loan solutions starting from 6.37% PI enable trustees to leverage their retirement investments strategically, with fast approvals within 1-3 business days.
Beyond stocks and bonds lies a world of opportunity for SMSF investors willing to explore non-traditional assets. The key is approaching these opportunities with the same diligence, research, and strategic thinking that forms the foundation of successful SMSF management.
