SMSF LRBA for Shares/ETFs

General Discussion / Chit Chat
1

Hello everyone,

I am running an “IJH.ASX with SPA3 Investor Timing” portfolio in my SMSF. Last Friday, 8 March, IJH’s performance over the previous 15 years was 13.55% p.a. (see chart below). Given this long-term performance, I am considering leveraging my SMSF IJH portfolio.

As you may know, an SMSF must enter a Limited Recourse Borrowing Arrangement (LRBA) with the lender to borrow for assets. After some research, only one lender/product - NAB Super Lever - will lend to an SMSF to purchase shares/ETFs. (There are around ten lenders if the SMSF wants to borrow for a property.)

NAB Super Lever rates are 10% p.a. for under $250,000.

I have a few questions for Forum discussion:

  1. Does anyone have an SMSF LRBA for purchasing shares/ETFs? If so:

    a) How long have you had the margin loan, and has your experience been positive?

    b) How easy is it to buy and sell shares/ETFs that are under a LRBA?

    c) Other than NAB Super Lever, do you know other SMSF LRBA lenders/products for shares/ETFs?

  2. What are your general thoughts on borrowing for shares/ETFs in an SMSF? Is it something worth considering, or is it not worth the effort for the additional gain?

Thank you.

John

image
image2760×1358 266 KB

2

John,

I haven’t used a LRBA in my Super Fund so can’t help with that.

However, here’s some food for thought. You could:

  1. use a CFD of IJH on the ASX and choose your own leverage factor. Problem with this is that you’ll pay interest on the entire position, which is not good for a B&H position.

  2. buy MVV on the US market, which is an Ultra ETF x2 of $MID. Note, there is a fee of 0.95% for this ETF.
    MVV | Ultra MidCap400 | ProShares

image
image1347×734 32.6 KB

  1. buy UMDD on the US market, which is an Ultra ETF x3 of $MID.
    UMDD | UltraPro MidCap400 | ProShares

image
image1347×751 31.8 KB

Of course, for the options 2 & 3 you’d need a US broker.

Also, for a B&H scenario remember the implications of the AUDUSD. Outperformance by IJH on the ASX over IJH on the ARCX is AUDUSD exchange var.

Hope that helps.

3

Hi Gary, thank you for the reply.

These are great alternative options to an SMSF LRBA, which I will consider.