ETFs are reshaping SMSF portfolios – advisers weigh in

Self-managed super funds (SMSFs) are ditching individual stocks and broadening their horizons.

That’s the key takeaway from the 2025 SMSFs Under Advice Report by AUSIEX, which highlights a growing shift toward exchange-traded funds (ETFs), particularly among advised SMSFs.

The data shows a clear trend: advised SMSFs are adopting ETFs at a faster pace than self-directed investors, using them to diversify across asset classes, sectors, and global markets.

In this wire, we ask financial advisers why these shifts occur. You can also access a copy of AUSIEX’s report and see the top ETFs held by advised and self-directed SMSFs at the end of this wire.

ETF adoption surging among advised SMSFs

According to AUSIEX, a former CommSec subsidiary that provides brokerage services for SMSFs and advisers, trustees have significantly increased their ETF allocations:

• ETFs now make up 32.68% of advised SMSF portfolios, up from 26.47% a year ago.
• Self-directed SMSFs, while slower adopters, have also increased their ETF exposure from 6.79% to 8.46%.

David Lane, Senior Private Client Adviser at Ord Minnett, sees ETFs as essential tools for SMSFs.

“Diversification is definitely a factor, as ETFs provide this in an easy-to-access, low-cost way. The continued strength of the US market and the rise of US exceptionalism have also played a role in this growth.”

Hugh Robertson, CEO of Centaur Financial Services, notes that market conditions have accelerated ETF adoption.

“With increased share market volatility investors are enjoying the accessibility and diversification of ETF products away from direct stock picking. Investors are getting smarter and over the past decade with historically low interest rates market cap weighted funds have done very well. This may change over the next decade now that interest rates are at a more normalised level."

Meanwhile, Brett Grant, Head of Product, Customer Experience, and Marketing at AUSIEX, points to a broader trend in portfolio diversification:

“Advised SMSFs tend to hold more securities - on average 15 securities compared to 12 for self-directed SMSFs. They are also more likely to invest in passive ETFs, active ETFs, LICs, LITs, hybrids, and AREITs.”

What’s driving the shift?

With ASX-listed ETFs managing $250 billion as of January 2025, it's clear why this structure is booming. But what are the specific use cases for SMSFs?

#1 - Global market access

ETFs give SMSFs seamless exposure to US tech giants, European industries, and emerging markets, helping to reduce home-country bias.

Lane notes that global markets have outperformed the Australian market in recent years, particularly in sectors like AI and healthcare, while Grant says advisers are finding ETFs to be an easy and efficient way to incorporate international shares into portfolios.

"Previous perceptions of Australian investors as having a home bias are fading as ETFs and trading technology give them better access to global markets," Grant says.

#2 - Diversification & risk management

Rather than concentrating their wealth in a handful of ASX-listed stocks, SMSFs are diversifying across regions and industries.

“The Australian share market is just 2-3% of the global market, so it makes sense to look abroad. The dominance of the US market over the past decade, particularly the Magnificent Seven, has attracted investors,” says Robertson.

#3 - Thematic investing and crypto

Interest in megatrends like AI, cybersecurity, and clean energy is growing. ETFs provide targeted exposure to these sectors without requiring deep expertise in individual companies.

“SMSFs are chasing returns with thematic ETFs, and this isn't a bad thing. They are trying to see where tailwinds are, we have spoken at length about the potential upside returns of technology and GLP1s, and profit from that," Robertson says.

#4 - Fixed income access

Despite the accessibility of fixed-income ETFs, SMSFs remain underweight in bonds. Robertson attributes this to historically low returns in fixed income but expects allocations to rise as rates normalise.

"As we get to a more normalised interest rate cycle this will attract more inflows as cash rates go lower and bonds starts to have a more normalised relationship with shares. Private credit is attracting money away from this traditional asset class at this point in time," he says.

#5 - Cost efficiency and simplicity

ETFs offer a low-cost alternative to actively managed funds and require less maintenance than managing individual stocks.

“Research consistently shows that most active fund managers fail to outperform the market. And their fees are far higher than most ETFs,” says Lane.

Are SMSFs taking too much risk with thematic and crypto ETFs?

While broad-market ETFs remain the foundation of SMSF portfolios, thematic and crypto ETFs are gaining traction:

• Thematic ETF allocations rose 13.15% among advised SMSFs and 15.7% among self-directed SMSFs.
• Crypto ETF trading volumes surged 420% for advised SMSFs and 380% for self-directed SMSFs in late 2024, though they still account for less than 1% of portfolios.

Opinions on these trends vary, with some advisers highlighting the risks of concentration, while others argue that thematic ETFs can enhance diversification.

Robertson acknowledges SMSFs’ growing appetite for high-growth sectors but warns against overexposure.

“Accessing thematics can actually reduce risk by diversifying away from market cap-weighted indexes. At this stage of the cycle, we’re big fans of equal-weighted ETFs and quality ETFs," he says.

Lane sees the Bitcoin ETF boom as more opportunistic than strategic, likening it to how investors have historically used gold ETFs as speculative hedges.

“Ord Minnett does not actively recommend crypto ETFs, as they carry high risks and lack formal research coverage. But we facilitate trades for high-net-worth and wholesale investors who request them," Lane says.

But Grant challenges market watchers not to dismiss crypto as merely an opportunistic play. As the asset class gains traction, both advisers and SMSFs may see it becoming a permanent fixture in portfolios.

"Our data has shown there to be consistent inflows into crypto ETFs which could potentially point to a shift in how some advisers view the asset class and the general de-fi thematic," Grant says.

Thematic ETFs as part of a core-satellite strategy

Lane highlights that thematic ETFs can be an effective complement to core holdings in a core-satellite strategy, and expects SMSFs to use them accordingly.

"Many investors will use thematic ETFs as part of a core-satellite strategy, where the core investment is the more strategic long-term investment, supplemented by the satellites (thematic ETFs) which may be more tactical or short-term. When used in this way, it can be an extremely effective strategy.

The report notes the prominent use of VanEck MSCI International Quality (Hedged) ETF and Vanguard MSCI Index International Shares ETF (ASX: VGS) as core exposures among SMSF investors, which Lane backs as solid choices.

Lane says while some themes carry higher risks, thematic ETFs don’t inherently add excessive risk as long as investors understand their underlying exposures and objectives and points out that this is an area where advisers add value.

Among the themes attracting SMSF interest at Ord Minnett are:

• Cybersecurity via Betashares Cybersecurity ETF (ASX: HACK)
• AI and Robotics via Global X ROBO Global Robotics & Automation ETF and Betashares Robotics and Artificial Intelligence ETF (ASX: RBTZ)
• Infrastructure via VanEck FTSE Global Infrastructure Hedged ETF (ASX: IFRA) and Global X US Infrastructure Development ETF (ASX: PAVE)

Ord Minnett also sees attractive opportunities beyond the US, particularly in the iShares MSCI Japan ETF (ASX: IJP) and Betashares India Quality ETF.

Growing interest in equal-weight and factor strategies

Beyond thematics, Grant highlights another key development: the shift away from market-cap-weighted indices.

He notes that SMSFs and their advisers are increasingly aware of concentration risk, with tech stocks dominating US market sector weights and banks and resources holding similar sway on the ASX. This growing concern is driving both issuers and investors toward strategies that reduce exposure to any single stock or sector.

As a result, equal-weight strategies like the Betashares S&P 500 Equal Weight ETF (ASX: QUS)  and the VanEck Australian Equal Weight ETF (ASX: MVW) are gaining strong traction, attracting nearly $1 billion and over $2 billion in assets, respectively.

what are the top 10 etfs smsfs are investing in?

So, which ETFs are SMSFs investing in the most? Here’s a breakdown of the top holdings among advised and self-directed trustees, courtesy of AUSIEX.

Advised SMSFs: Top ETFs - % of holdings

1. Vanguard MSCI Index International Shares ETF (ASX: VGS) - 5.03%
2. Vanguard Australian Shares Index ETF (ASX: VAS) - 4.37%
3. iShares S&P 500 ETF (ASX: IVV) - 3.99%
4. VanEck MSCI International Quality ETF (ASX: QUAL) 3.89%
5. iShares Global 100 ETF (ASX: IOO) - 3.65%
6. Vanguard Australian Property Securities Index ETF (ASX: VAP) - 3.05%
7. Vanguard Australian Equal Weight ETF (ASX: MVW) 2.95%
8. Vanguard MSCI Index International Shares Hedged ETF (ASX: VGAD) 2.88%
9. Vanguard Australian Shares High Yield ETF (ASX: VHY) - 2.85%
10. Magellan Global Fund (Open Class) (ASX: MGOC) - 2.74%

Self-directed SMSFs: Top ETFs - % of holdings

1. Vanguard Australian Shares Index ETF (ASX: VAS) - 13.41%
2. iShares S&P 500 ETF (ASX: IVV) - 6.47%
3. State Street SPDR S&P/ASX 200 Fund (ASX: STW) - 6.05%
4. Betashares Nasdaq 100 ETF (ASX: NDQ) - 5.99%
5. Vanguard MSCI Index International Shares ETF (ASX: VGS) - 5.57%
6. Vanguard US Total Market Shares Index ETF (ASX: VTS) - 4.82%
7. Vanguard Australian Shares High Yield ETF (ASX: VHY) - 4.10%
8. iShares Global 100 ETF (ASX: IOO) - 3.00%
9. Betashares Australian High Interest Cash ETF (ASX: AAA)
10. Magellan Global Fund (Open Class) (ASX: MGOC) - 1.86%

You can see how this compares to Livewire's 10 most tipped ETFs for 2025.

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