A Trillion-Dollar Sector: The Continued Rise of SMSFs

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Over the past decade, Australia’s superannuation industry has become dominated by enormous institutional funds managing hundreds of billions of dollars. But beneath that towering landscape sits another part of the system that continues to grow quietly and steadily: self-managed super funds.

Today there are more than 650,000 SMSFs in Australia, controlling over $1 trillion in retirement savings and involving around 1.2 million Australians. Despite representing only a small fraction of the population, SMSF investors collectively manage around a quarter of the nation’s superannuation assets.

And interest in the sector is rising again.

In the last financial year alone, more than 40,000 new SMSFs were established, the strongest growth the sector has seen in several years.

Why are so many Australians choosing to run their own super? The answer often comes down to something surprisingly simple: control. For many investors, superannuation is their largest pool of wealth outside the family home. The ability to directly manage those assets — choosing the shares, property or investments that sit inside their retirement strategy — can be extremely appealing.

And increasingly, the research suggests that when SMSFs are managed well, they can be remarkably effective.

A System Built on Choice

Australia’s superannuation system is often described as one of the most successful retirement systems in the world. But one of its defining features is the freedom it gives individuals to take control of their own retirement savings if they choose to do so.

Self-managed super funds represent the purest expression of that freedom. Rather than handing investment decisions to a large institutional fund, SMSF trustees become responsible for making those decisions themselves. They determine the investment strategy, choose the assets and manage the overall direction of the fund. For many people, that level of responsibility might sound daunting. But for others — particularly financially engaged investors — it is exactly what makes SMSFs attractive.

Investors who establish SMSFs often want the ability to:

• Invest in assets they understand

• Directly control their portfolio

• Take a long-term view on investments

• Integrate their super strategy with their broader financial goals

  
  

In short, they want their superannuation to feel like an active part of their wealth strategy, rather than something managed at arm’s length.

The Appeal of Familiar Assets

One of the most common motivations for establishing an SMSF is the ability to invest in assets that investors feel comfortable with. Large super funds typically invest through diversified managed portfolios. While this approach offers convenience and professional management, it can also feel somewhat removed from the underlying assets. SMSFs allow trustees to take a more direct approach.

Many SMSF portfolios include combinations of:

• Direct Australian shares

• Exchange-traded funds

• Term deposits and fixed income

• Commercial or residential property

  
  

For some investors, the appeal lies in the transparency. They know exactly what sits inside their super fund. For others, it’s about alignment with their broader investment philosophy. Property investors, for example, often appreciate the ability to hold property within their super structure, subject to the regulatory rules governing SMSF investments. This ability to tailor investments can make the retirement strategy feel more personal — and more purposeful.

What the Performance Data Shows

The performance of SMSFs has long been debated. Critics sometimes argue that individual investors cannot compete with the scale, research and investment capability of large institutional funds. Supporters, on the other hand, point to the flexibility and long-term discipline many SMSF trustees bring to their portfolios. Interestingly, recent research suggests the reality may sit somewhere between those two views.

Research conducted by the University of Adelaide’s International Centre for Financial Services found that SMSFs outperformed APRA-regulated super funds by approximately 1.2% per year over a five-year period.

The research also found significant variation in outcomes. The top 25% of SMSFs achieved average returns of around 13%, compared with roughly 9.5% for the top APRA funds.

At the same time, some SMSFs underperformed, particularly those with very small balances or poorly diversified portfolios.

This highlights an important point: SMSFs are not automatically superior investments. Their success depends heavily on the engagement, strategy and discipline of the trustees running them. But the data does challenge the idea that individual investors cannot build effective retirement portfolios.

When managed thoughtfully, SMSFs can compete with — and sometimes outperform — institutional alternatives.

Engagement Changes Behaviour

One of the more subtle advantages of SMSFs may have less to do with asset allocation and more to do with behaviour. Running an SMSF tends to make investors more engaged with their financial future. Trustees must regularly review their fund’s investments, consider long-term strategy and remain aware of regulatory obligations. That engagement often leads to greater awareness of:

• portfolio performance

• diversification

• tax efficiency

• long-term retirement planning

  
  

For many trustees, their SMSF becomes a focal point for their broader financial life. Decisions around super, personal investments, property and retirement planning start to connect more clearly.

In that sense, an SMSF is not just a structure — it can become a framework for more intentional wealth management.

The Role of Professional Advice

Despite the name, self-managed super funds are rarely managed entirely alone.

Most successful SMSFs operate with the support of a professional advice team that may include:

• accountants

• financial advisers

• auditors

• lending specialists

• legal advisers

  
  

This support structure helps ensure the fund remains compliant with superannuation law while also enabling trustees to implement sophisticated investment strategies where appropriate.

For example, some SMSFs choose to invest in property through limited recourse borrowing arrangements (LRBAs), a specialised structure that allows a super fund to borrow to acquire certain assets. These strategies require careful planning, strong compliance and experienced advice — but when implemented correctly, they can form part of a long-term wealth strategy.

SMSFs Are Not for Everyone

While SMSFs offer flexibility and control, they are not suitable for every investor. Trustees take on significant legal responsibilities, including compliance with superannuation legislation and the obligation to act in the best interests of the fund’s members. There are also practical considerations.

Operating an SMSF involves administrative costs, regulatory requirements and the need for ongoing engagement with the fund’s investments.

As a result, SMSFs are often considered more suitable for investors with larger balances — typically $200,000 to $500,000 — where the cost structure becomes more efficient. For those willing to take on the responsibility, however, the benefits can be substantial.

A Quiet but Powerful Part of the System

Australia’s retirement system is vast and complex, but SMSFs occupy a uniquely important corner of it.

They represent one of the largest pools of privately controlled investment capital in the country, managed by individuals who have chosen to take an active role in shaping their financial future.

For many Australians, that choice reflects a broader shift in mindset.

Rather than viewing superannuation as a distant and abstract savings pool, SMSF trustees often see it as a powerful investment vehicle — one that can be aligned with their goals, their values and their long-term strategy.And as the latest data suggests, when that responsibility is taken seriously, the results can be impressive.

At Etairos Finance, we regularly work with advisers and SMSF trustees exploring lending strategies within super. If you’re considering how borrowing structures may fit into your SMSF investment strategy, it’s important to seek professional advice to ensure the structure is appropriate and compliant.