In the previous article, my self-managed superannuation fund investments — Part 1, I discussed the investing philosophy regarding my SMSF, based on my age and risk tolerance, and my managed fund selection for the bond and international-equity asset classes.

In this article, I will address my search for funds in the asset classes of domestic equities and real assets.

Expanding the Boundaries


My requirements for domestic equities were straightforward. I was looking for exposure to large-, mid-, and small-cap stocks.

When considering an active large-cap fund, I was searching for a portfolio manager with a solid track record through the full economic cycle and with significant experience and knowledge.

In addition, I was looking for a low-cost domestic-equity large-cap passive fund backed by a team with strong administrative and execution capabilities.

Many Australian equity small-cap managers outperform the S&P/ASX Small Ordinaries Accumulation Index, so my main requirement for this sector was that the strategy must be an active. Secondly, I was seeking a fund that had mid- and small-cap exposure and a solid portfolio manager supported by a large and talented analyst team.

Real assets comprise listed property and listed infrastructure, and it is an interesting and diverse asset class. In this sector, Australia has some very strong portfolio managers who invest globally, have extensive experience, and are supported by outstanding investment teams. So, the requirements for both the listed property and listed infrastructure sectors were an active strategy with domestic and global exposure.

I was also looking to underpin my active investments in these sectors with low-cost, well-diversified passive funds.

Importantly, short-term underperformance rarely causes me much concern but is merely a watchpoint to ensure it does not develop into medium- and then long-term underperformance.

My SMSF portfolio


After further extensive searching and consideration, I settled on the following funds.

Domestic Equities


For domestic equities, I wanted exposure to large-, mid-, and small-cap stocks.

Greencape Broadcap (14654)

  • Morningstar Analyst Rating: Gold
  • Morningstar Category: Equity Australia Large Growth

Greencape Broadcap sets a high standard for other domestic-equity fund managers in all facets of the investment process, including portfolio construction.

Matthew Ryland has managed this strategy superbly since starting the firm with David Pace in 2006. With an eye on the future, Ryan Green was promoted to co-portfolio manager in May 2020. He previously managed a 5% sleeve of this portfolio from 2017 and has demonstrated a keen eye for identifying underpriced growth stocks.

Greencape's meticulous fundamental research is focused on company business models and management. The team has developed a vast network of company contacts, traveling widely to collect knowledge and identify underappreciated market milestones for stocks to rerate.

However, the cost can be slightly higher than peers once the performance fee is added to the base annual management fee, but that doesn't detract from Morningstar's high level of conviction in the strategy.

Fidelity Future Leaders (19893)

  • Morningstar Analyst Rating: Silver
  • Morningstar Category: Equity Australia Mid/Small Blend

Fidelity Future Leaders is a strong option for Australian small-cap equities exposure, given the experience of portfolio manager James Abela and its pragmatic process.

Morningstar has a high regard for Abela and his portfolio management skills. He has developed and applied a unique process for investing in the Australian small-cap segment and delivered exceptional results over a sustained period. While applying stringent bottom-up analysis, he constructs a well-considered portfolio balanced between self-described style categories of quality, momentum, transition, and value.

The cost is also reasonable with a base management fee of 1.2% per year and no performance fee.

SPDR S&P/ASX 200 (STW)

  • Morningstar Analyst Rating: Bronze
  • Morningstar Category: Equity Australia Large Blend

SPDR S&P/ASX 200 is an excellent option for investors seeking access to diversified domestic equities at a low cost. It aims to achieve its objective by passively tracking the S&P/ASX 200 Index.

The fund derives strong support from the global reach and execution capabilities of its parent, State Street.

Launched in 2001, this was one of the first passive funds benchmarked to the S&P/ASX 200 and one of the largest in Australia.

In all, this fund is a solid choice, providing skilled execution and low-cost access to Australian equities. The annual management fee is 0.13%.

Domestic/International Real Assets


Real assets comprise listed property and listed infrastructure. I wanted an active strategy with domestic and global exposure.

Resolution Capital Global Property Securities ETF (RCAP)

  • Morningstar Analyst Rating: Gold
  • Morningstar Category: Equity Global Real Estate

Resolution Capital Global Property Securities ETF provides exchange-traded access to an outstanding global property strategy. The exchange-traded fund mirrors the unlisted Resolution Capital Global Property Securities strategy, which receives Morningstar's strongest level of conviction thanks to the knowledgeable investment team and strict implementation of the time-tested investment process.

Andrew Parsons is the driving force at Resolution, being the founder, senior portfolio manager, and chief investment officer. Resolution searches for investable property companies and trusts that operate in high-barrier-to-entry markets where landlords have pricing power, a high level of recurring earnings, low debt, and strong stewardship. The resulting portfolio is concentrated and benchmark unaware.

This ETF charges a management fee of 0.80% plus a performance fee of 20% of the fund's outperformance of the index. A stable team, unrivaled research, and a robust process bestow this strategy with a commanding edge over peers in global property investing.

SPDR Dow Jones Global Real Estate ESG ETF (DJRE)

  • Morningstar Analyst Rating: Bronze
  • Morningstar Category: Equity Global Real Estate

Having adopted a responsible investment overlay in February 2022, SPDR Dow Jones Real Estate ESG ETF remains a solid option for investors seeking exposure to diversified global real estate.

Since early February 2022, DJRE has been tracking the Dow Jones Global Select ESG Real Estate Securities Index, which is the environmental, social, and governance-focused version of its previous tracking index, the Dow Jones Global Select Real Estate Securities Index.

The fund derives strong support from the global reach and execution capabilities of its parent State Street.

SPDR has vast experience in managing passive funds with reliable execution. The proficiency is exhibited by the historically low tracking error, fine bid-ask spreads, and ample trading volumes.

The portfolio characteristics remain true to the parent index, with a low active share of around 13% and an expected tracking error of around 1% compared with the parent index.

With around 270 total holdings and less than 35% exposure in the top 10, the target benchmark is well diversified.

The portfolio consists of companies generating most of their revenue from rent. Over 65% of the portfolio consists of companies listed in the United States, though investors should note that most of the entities are multinational and revenue generation is distributed across multiple geographies.

The annual fee of 0.50% charged by DJRE gives it an edge over competing active managers. The fund is a decent choice for international exposure in the real estate market.

Magellan Infrastructure ETF (MICH)

  • Morningstar Analyst Rating: Silver
  • Morningstar Category: Equity Global Infrastructure—Currency Hedged

Magellan Infrastructure's listed exchange-traded fund MICH remains a strong proposition with its first- class approach.

Head of infrastructure and lead portfolio manager Gerald Stack leads the strategy. He is a meticulous investor, having run the strategy with prowess since 2007 inception. Stack is capably supported by portfolio managers Ofer Karliner, Ben McVicar, Jowell Amores, and David Costello, plus three analysts. The team largely operates as a silo, meaning it's somewhat isolated from the broader business issues Magellan has encountered recently.

In applying a strict definition of infrastructure, Magellan's process is more conservative than some peers. To be considered for inclusion, a company must possess an asset that is essential for the efficient functioning of society and have profits that aren't overly affected by competition, commodities prices, or sovereign risks. The risk-conscious attitude tends to lead to greater utilities allocations.

One point not favorable to the assessment of this strategy is the above-average annual base fee plus performance fee. But overall, a diligent team applies a fastidious approach here.

Vanguard Global Infrastructure ETF (VBLD)

  • Morningstar Analyst Rating: Bronze
  • Morningstar Category: Equity Global Infrastructure

The strategy aims to track the FTSE Developed Core Infrastructure Index for a competitive investment management fee. This index captures the large- and mid-cap representation of infrastructure stocks from across 20 developed markets.

FTSE defines infrastructure stocks as those having at least 65% of revenue from “core infrastructure activities," which include development, ownership, operation, and management of transport, energy, and telecommunications infrastructure.

The FTSE Index's weighting is tilted to conventional electricity and railroads, which are subsectors with moderate sensitivity to the gross domestic product and business cycle.

For investors seeking an uncomplicated, low-cost, low- maintenance solution for global infrastructure exposure, Vanguard Global Infrastructure ETF presents a solid value proposition considering its price advantage, liquidity, portfolio diversification, and track record of effective implementation.