Investment Policy for Trust Accounts

My brother is opening the trust accounts. They will be invested in local mutual funds. Unlike Australian or US managed or mutual funds these do not make distributions but like an Australian listed investment company (closed end fund) they pay tax on their earnings. The tax though is the relevant investment rate not the corporation tax. This is 25% of the inflation adjusted gain. Also, if you sell a mutual fund in Falafelland 25% capital gains tax is withheld. Looks like we can't really avoid this tax. Foreign tax paid is not refundable as cash in Australia – it can only be deducted against Australian tax liable.* Because my son's earnings would be way below the tax free threshold (initially each of these accounts will have about AUD 44k in them) he wouldn't need to pay tax if the investment funds were based in Australia.

My brother suggested investing 70% in bonds and 30% in stocks. As a long-term investment policy – we will be investing for the next 20 years for my son – I think this is too conservative.

This is both because in the long run stocks have performed better than bonds in most countries but also because interest rates are now low. This chart shows the real returns on US investments over the last century:

Since 1980, bonds did well as interest rates fell from historic highs. But in the 40 years up to 1980 bonds lost money in real terms as interest rates rose. So, I told him if we are adopting a "set and forget" investment policy then we should go for 60% stocks and 40% bonds. The mix between local and international investments should be 50/50. The local market is one of the cheaper ones globally.
OTOH the local currency is quite strong currently. If we can revisit investment policy periodically then 70% bonds is OK for now. If there is a future larger decline in stock markets we would then switch to a more aggressive stance.

My brother's children are much older and so their trust accounts will exist for less time. If they intend to spend the money when they get it then I guess a more conservative stance might make sense. The youngest though will still need to wait 9 years to get her money so I think she can be more aggressive.

* Labor wants to make franking credits from Australian companies non-refundable as well. This would bring back symmetry in the way these credits are treated. Of course, I think we should go in the other direction and make foreign tax refundable :)

Target Portfoilo Performance December 2018

In AUD terms the target portfolio lost 1.85% in December, gaining 0.3% for 2018 as a whole. The MSCI gained 0.9% for the year and I gained 2.3%. The graph shows the returns for the each month in 2018 for the target portfolio, the MSCI World Index in AUD terms, and the target portfolio:

The target has lower volatility but is more correlated to the MSCI than I was. So the target portfolio wouldn't have provided very useful diversification in 2018.

Crowdfunded Real Estate

A relatively new investment concept is crowdfunding real estate investments. The idea is that an individual could directly invest small amounts in a range of properties or development opportunities thus reducing their risk. Rather than a fund manager picking the properties, investors could evaluate deals themselves.

I read about Fundrise on Financial Samurai. It seems to actually be closer to a traditional unlisted real estate managed fund, except there is more of a property development angle. They allow investments in both real estate debt and equity. They claim very high historical rates of return. I find it hard to understand how they could be so high. Equity investments could have leverage but debt investments must return the interest rate on the mortgage minus costs? I didn't feel that there was enough transparency around how returns are generated. In any case, unfortunately, it is not open to non-US investors.

So, I looked for crowdfunded real estate opportunities in Australia. This is what I found:

Crowdfundup – I only found one active project on the site.

Estatebaron – This website has more active deals. It focuses exclusively on property development. There seems to be very little information about each project and the site is much less polished.

Brickraise – The link seems to be dead.

Domacom – This is an ASX listed company. The company looked like they were heading to bankruptcy before a recent fundraising. The new money will only last just over half a year as their burn rate is AUD 5 million a year. They will need more than AUD 0.5 billion assets under management to break even given a 0.8% of NAV management fee. However, they have the largest number of deals on their site and have high quality information. Deals include a wide range of projects including solar farms and bioenergy as well as more conventional real estate. This is something I might consider when we have an SMSF up and running if it looks like the company will survive.

Based on this, real estate crowdfunding is not well developed in Australia. Do you know of other better websites?

New Investment: PERLS XI

As a place to park Australian Dollars cash until I can move it out of Interactive Brokers, I bought some PERLS XI hybrid bank securities. These are Commonwealth Bank bonds that instead of paying interest pay franked dividends. The "grossed up" rate is 5.7% p.a. roughly. At some point the bonds should convert into Commonwealth Bank shares. However, the conversion rate isn't pre-determined. Instead, $100 of bonds will convert to $100 of shares at whatever the share price is at that time. I thought this was better than earning only 1.4% interest on my money, though there is a risk that the capital value will fall if interest rates rise in Australia. That doesn't look very likely at the moment to me. They are in theory less safe than bank deposits, but the risk of Commonwealth Bank getting into bad enough financial trouble in the next few months to reduce the value seems extremely low to me.

I think this is the first time I have ever bought bonds directly for my own account.

Insane Moves in Australian Dollar and Yen This Morning

Moves this big never happen in currencies. It's like one month's worth of moves in 5 minutes. Yen did the same thing in the other direction, other currencies not so much. No idea what sparked this. I managed to buy AUD24k...

This is being called a "flash crash".

December 2018 Report

You'll probably have heard that this was the worst December for US stocks since 1931. December is seasonally a positive month for stocks. Things weren't quite that bad in Australia and because the Australian Dollar fell, our returns for the month in AUD terms ended up being positive.

The Australian Dollar fell from USD 0.7302 to AUD 0.7049 The MSCI World Index fell 7.00% and the S&P 500 9.03%. The ASX 200 fell only 0.01%. All these are total returns including dividends. We gained 0.24% in Australian Dollar terms and lost 3.24% in US Dollar terms. So, we outperformed the Australian and international markets. This is not surprising given the weight of US Dollar cash in our portfolio. Our currency neutral rate of return was -1.74%.


Here again is a detailed report on the performance of all investments:

The table also shows the shares of these investments in net worth. At the bottom of the table I also included the Australian Dollars return from foreign currency movements and other net investment gains and losses - net interest and fees.

Things that worked quite well this month:

• US Dollars cash 
• Gold
• Property, including:
• My jointly owned apartment with my brother. We got an offer for the apartment near the end of the month and I raised the carrying value in line with that.
• TIAA (direct US investments) and Pendal (REITS) real estate funds.
• On the other hand BlueSky lost a lot...
• Our direct share holdings in Medibank and Yellowbrickroad.
• Again, the PSS(AP) superannuation fund did relatively well (though losing) compared to Unisuper. But on the way up it gained just as much as Unisuper. It has both lower beta and higher alpha... At least based on the investment choices I have made within the fund.

These all show the value of diversification pretty nicely.

What really didn't work:

• Cadence Capital, again fell sharply. It's performance in the last three months has been very bad. It's not surprising that they have cancelled their IPO of the Cadence Opportunities Fund. They received only AUD 8 million of subscriptions. It will still go ahead as an unlisted public company, whatever that is. Overall, we have lost money investing in Cadence.
• BlueSky fell back too.  We still have made some money on this investment.
• 3i, China Fund, Pershing Square, and CFS Geared Global Shares all fell in line with global stock markets. The latter would have benefited from the fall in the Australian Dollar, which for an investment denominated in Australian Dollars is included in the return on that investment, but is separated out for the investments denominated in foreign currency...

We moved towards the new long-run asset allocation:*

This is partly because I am classifying cash in trading accounts as "commodities". I started moving cash from my US bank account to Interactive Brokers. Another large part of the change was due to the fall in the Australian Dollar raising the value of our USD cash in AUD terms. From next month we should see a big increase in allocation to bonds instead.

We also invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Then there are distributions from funds and dividends. Other moves this month:

• I bought 400 shares of the China Fund (CHN) early in the month. Not a good idea.
• I bought 25,000 shares of Bluesky Alternatives in the middle of the month (BAF.AX). Another bad idea.
• I bought 500 shares of Pershing Square Holdings (PSH.L) at the end of the month. So far, not a bad idea.
• I received cash from UBS in my US bank account and started moving it to Interactive Brokers and from there to our Australian bank account. After this first transfer, most of this money will go into buying a US Treasury Bills ladder in the short run. Today, I discovered that I have to keep the cash at IB for 2 months before I can move it to another bank account. So I am looking to buy some Australian bonds (probably bank hybrid securities) in the interim.

* Total leverage includes borrowing inside leveraged (geared) mutual (managed) funds. The allocation is according to total assets including the true exposure in leveraged funds.

What's Your Forecast for the Stock Market?

My brother asked me what my forecast for the stock market was. Here is what I wrote to him:

"Well, I’ve been surprised how weak it has been recently, particularly in December, which you may have heard is so far the worst December in US stock markets since 1931. December is a seasonally strong month as is January. The US economy has been strong though house prices have been falling in many places, presumably due to the Fed raising interest rates and this seems to have been the main reason why the market is down. House prices have been falling in Sydney and Melbourne without any increase in interest rates here. Some indicators though show that the global economy could already be in recession, but I don’t know how reliable that is. The reason I was a bit surprised was it has been very predictable that before recessions the yield curve would invert (short term interest rates higher than long term). This hasn’t happened yet in the US. However, the Fed is signalling that they are going to raise interest rates by another 0.5% in 2019 which would reach an inversion probably. Stock markets tend to be leading indicators and so looks like this time it is more leading than usual. The US economic expansion is the 2nd longest in history and so presumably would come to an end some time soon (Australia hasn’t had a recession since the early 90s though…). Now we can say that the bull market ended as stocks have fallen 20%. If we look at the last two recessions and stock market crashes in the US, the stock market bottomed near the end or after the actual recession – in March 2003 and 2009. At that point the Fed will have slashed interest rates dramatically and unemployment will be high. OTOH in the 1990s the US market bottomed in October 1990, which was when the recession was only just getting underway. The Gulf War turned that around.

I did reduce my exposure to the stock market in early October, but not by enough. So, I’d probably use rallies in the market to reduce exposure more at this point. I was planning to use trading as a hedge, but I stopped trading soon after that as backtests weren’t good and I got ill and didn’t have time to work on it.

Of course, I could be completely wrong about all of this. In the last cycle I got out too early and got back in too early. Probably this time I’ll be late :)

I’m not planning on buying Australian Dollars in a hurry either, even though the current price is quite good. I’ll buy them gradually."

No Interest on More Than $2 Million Deposit?

My brother and I have between us more than USD 2 million in cash in an account at UBS – most of the money we inherited – that we have been jumping through hoops to get out of there. In the meantime the bank seems to be paying no interest on the money and in the last two weeks it actually the account went down by USD 800 for no clear reason – online I can't find any info on fees the bank has charged. How is that possible?

Looks like we have everything in place now to close the account but have been told it'll take about 2 weeks still given the coming holidays etc. However, the client manager told my brother that she could transfer the majority of the money to us right away, while keeping some for unspecified fees and sending us the remainder not spent on fees later. My brother told her that he was happy to wait to get the money in one lump when they close the account. I was shocked and told him to accept her offer. It's hard for me to imagine that the extra fees for a second transfer could be more than the interest we could potentially earn on the money in two weeks (c. USD 2,000 if investing in US Treasury bills).

Update: We missed the client manager leaving for the Christmas break, so likely won't be till mid-January that we'll get the money out...
Another update: Actually, we now got about 90% of the money transferred to us. Why they need to hang on to a 1/4 million dollars, I don't know...

Will Listed Investment Companies Restructure if Labor Eliminates Refundability of Franking Credits?

As you probably know if you live in Australia, Labor plans to abolish the refundability of franking credits - the tax credits attached to dividends for company tax already paid. This will affect taxpayers with low marginal tax rates including self managed superfunds that are paying out a pension, which is tax free if they have less than AUD 1.6 million in assets for that member. This could significantly cut the retirement income of self-funded retirees who have a lot of Australian shares. OTOH, this was the policy prior to 2000 and most other offsets, like foreign tax credits, aren't refundable either.

I already plan to have relatively small amounts of Australian shares when I start an SMSF - this makes sense as I have lots of investments outside super and so it makes sense to put the least tax efficient investments like managed futures into super.

Listed investment companies (LICs) are closed-end funds that pay tax on their earnings and then distribute franked dividends to shareholders. I own shares in several of these like Platinum Capital, Cadence Capital, Hearts and Minds, and Tribeca Global Resources. Both Geoff Wilson and Cadence Capital's Karl Siegling have suggested that they will reorganize their funds if this happens. There are a couple of ways this could happen. One I had thought about, is to delist and turn the fund into a unlisted managed fund (mutual fund). For funds that trade at a premium to NAV, like several of Wilson's funds, this would cause investors to lose a lot of money as now their holdings would only be worth the NAV. For funds trading at a discount to NAV it could be attractive, as shareholders would gain wealth (but see below). To the extent that the funds receive franked dividends from companies, they would still have to distribute franking credits, but capital gains would no longer create franking credits.

Another option I didn't know about, is that they could instead convert to a listed investment trust like an ETF that doesn't pay taxes. This solves the problem of wealth destruction for funds trading at a premium to NAV.

But the article I linked says that this would result in realization of the portfolio for tax purposes. This could be a huge tax bill for companies like Argo that do little trading. The funds will need to pay out a massive special dividend to distribute the associated franking credit. According to Argo's website they will need to pay 72 cents in tax for liquidating the portfolio. That means they would have to pay a $1.68 cash dividend and so actually sell 23% of the portfolio to pay the dividend out. Some other funds have undistributed franking credits and so would also need to sell shares to generate the cash for such a dividend. They will need to do this soon, as there will probably be an election next May. So, I am a bit skeptical that many will.

Was It a Good Decision to Switch to Defined Contribution Superannuation?

Back in 2009 when I started with my current employer, I carried out a cost-benefit analysis to see whether it made sense to stay in the default defined benefit scheme or to switch to the defined contribution scheme. As a result of the analysis I switched to defined contribution.

Was that a good decision. Using the info in the Unisuper PDS and my data I compute that if I retired at the end of this month I would get a lump sum of AUD 213k. My actual Unisuper account is at AUD 284k. So, so far it's been a good decision.

For context, in Britain, there have been strikes and demonstrations against the plan to switch academics from  defined benefit to defined contribution. But I see defined benefit as a regressive form of socialism where people who are promoted near the end of their career suck the benefits from the system. This is because the lump sum benefit is proportional to the members salary in the last 5 years. I've seem quite a few people promoted to professor in their last few years and of course, deans and other senior administrators benefit heavily from the scheme. This is at the expense of successful researchers who are promoted early and stay in research at a more or less constant salary.

Target Portfoilo Performance November 2018

The target portfolio gained 0.22% in AUD terms. Offsetting losses in Ausrtalian shares, gold, and unhedged foreign shares there were gains in particular in managed futures and buyout PE.

FIRE?

I just read what was a controversial blogpost at Financial Samurai:"Why $5 Million Is Barely Enough To Retire Early With A Family". The post analyses the income and expenditure of a family living in west Los Angeles. A lot of commenters are critical of the assumptions and spending behavior of this family and some people provide some alternative numbers. That got me thinking about the numbers for our family in a bit more detail than I had thought about previously. In the following, I assume we retire where we currently live in Canberra, Australia.

Our net worth is only a bit over half that in Ken's blogpost: AUD 4 million (USD 3 million). We spend about AUD 10k (USD 7k per month) including mortgage interest (but not taxes) compared to their USD 14k per month. If we retired, most of our spending would be unchanged. We don't wear fancy clothes to work and we don't commute long distances. Assuming we continue daycare for 3 days a week (a very good idea in my opinion) we would lose the government subsidy, increasing our spending by AUD8k per year. Anyway, we would progress to private pre-school and likely private school after that going forward so we will have schooling expenses of a similar level. Unlike the American case studies, our health insurance would be unchanged at AUD 6k per year. In fact, it would make sense in my opinion to drop the private health cover and rely on the government system as we will no longer need to pay the Medicare Levy Surcharge if we don't have private insurance. Moominmama will probably want to keep the coverage, though, because she thinks private everything is better (see schools above). Also, unlike the US, we don't need to worry about saving for college tuition because almost all Australian universities are public and students borrow the tuition costs from the government and pay it back as their post-graduation income allows.

Another thing that would be more expensive for us is international travel. This year we traveled as a family for a month to three Northern European countries and Japan. As I went to three international conferences, my fare was paid my employer. I also deducted two weeks accommodation for two conferences which were in the same city and half my wife's airfare from our taxes. She also attended one of the conferences. If we had to pay for everything ourselves, it would have cost us about AUD 5k more.

On the income side, if we stop working, our tax will fall to effectively zero. We will put as much as possible into superannuation and two tax-free thresholds and franking credits should mean no tax on the earnings of the "taxable" part of the portfolio. If I get back into trading successfully, we probably will have to pay tax again, but then our income will be higher too.

So AUD 130k or so per year is about 3.25% of the net worth, which is close to ERN's recommended withdrawal rate. So, in theory we could retire now. As, I'm in my mid-50s, this would still qualify as early retirement. However, I am a bit worried about rising expenditure and a looming economic downturn. Also, at the moment I am happy with my job and so it doesn't make sense to sacrifice the salary. So, at least for the next year we won't implement the RE part of FIRE.

November 2018 Report

Volatility in financial markets continued this month but I hardly traded at all and for us it was a fairly quiet month financially with mostly background prep work. The Australian Dollar rose from USD

0.7083 to USD 0.7302 The MSCI World Index rose 1.51% and the S&P 500 2.04%. The ASX 200 fell 1.96%. All these are total returns including dividends. We lost 1.88% in Australian Dollar terms and gained 1.15% in US Dollar terms. So, we  outperformed the Australian market and underperformed international markets. Our Australian Dollar returns are now strongly driven by changes in the exchange rate as cash in US Dollars and other currencies are a large part of our portfolio. Our currency neutral rate of return was -0.14%.


Here again is a detailed report on the performance of all investments:

The table also shows the shares of these investments in net worth. Futures contracts are at the bottom. It doesn't make sense to compute shares or rates of return for those. Things that worked quite well this month:

• Bluesky Alternatives rose sharply after Geoff Wilson engineered the firing of most of the board and Pinnacle Investment withdrew their proposal to manage the fund. It now looks like Wilson Asset Management will end up managing the fund. Most Wilson LICs (closed end funds) trade above net asset value.
• The Hearts and Minds IPO started trading and performed well.
• International hedge funds: Tribeca and Pershing each did well in relative terms as did Winton.
• The China Fund had a decent bounce and Boulder Income Fund bounced back very nicely to almost return to it's September value.

What didn't work:

• Cadence Capital, again fell sharply. It's performance in the last three months has been very disappointing.
• Perhaps relatedly, small cap Australian funds also performed badly.
• Medibank Private fell sharply after the Australian Defence Department didn't renew its contract with them.
• UK private equity firm, 3i, fell further, though it bounced from its lows.

We moved slightly back towards the new long-run asset allocation:*

Most of the change was due to the rise in the Australian Dollar reducing the value of our USD cash in AUD terms...

We also invest AUD 2k monthly in a set of managed funds, and there are also retirement contributions. Then there are distributions from funds and dividends. Other moves this month:

• As mentioned above, Hearts and Minds began to trade and I increased my holding up to the amount I originally requested in the IPO.
• I sold some Platinum Capital (PMC.AX) and bought the equivalent actively managed ETF PIXX.AX instead. The idea was that PMC was overvalued. So far this trade hasn't worked out.
• I bought more Pershing Holdings (PSH.L) and 3i (III.L). Though I increased each position by 50%, each is still only around 0.8% of net worth.
• I did a couple of trades in futures options and futures.

* Total leverage includes borrowing inside leveraged (geared) mutual (managed) funds. The allocation is according to total assets including the true exposure in leveraged funds.

Put Writing Strategy

ERN recently posted again about his put writing strategy. Despite the market falls in October he ended up for the month. This seems to be down to luck that after his contracts went into the money (which means a loss if you write options) around 12th October, they then recovered substantially before the expiry date. I was curious about the performance of such a strategy in the long term. You can now buy an ETF that implements a similar strategy. It differs a little from ERN's strategy. In particular, the ETF sells options each month, rather than 3 times a week. It tries to match the performance of the CBOE S&P 500 put writing index. The index goes back to 1986! In the following I analyze the performance of the strategy since January 2007. Looking at the chart of the index, it seems to track the fluctuations in the stock market quite closely over the last 10 years:

Most of the time there is lower volatility and then there are occasional spikes. When I regress monthly returns on the monthly returns of the S&P 500 total return index (i.e. including dividends) I get a beta of 0.64 and annualized alpha of 0.9%.* The R-squared is 0.74. After transaction costs that alpha will likely disappear. This is looking a lot like investing 64% of your money in an S&P 500 ETF and the rest in cash with occasional volatility spikes added in.

Of course, this might not be much like the return profile that ERN is getting as his performance in October shows.

 * This isn't the classic CAPM regression where you deduct the risk free rate first, but that won't make much difference here.

Trust Accounts

As I mentioned before, my mother's will leaves money for each of her grandchildren – currently six of them including Moomin. They can't get this money until they are 23. The two eldest grandchildren are already 23 or over and so will get their money right away. We now have a clearer picture of what will happen with the other's money. My brother will set up trust accounts with his bank for each of them in his (and my mother's country). These accounts can then invest in any investments they like though probably only through managed funds/shares available in that country. The income will be taxed at source at 25%. I did some research and if we get Moomin a tax file number here in Australia and open a bank account for him, we can submit a tax return each year and get the foreign tax refunded as cash. I used the ATO's tax calculator to check that. As he is inheriting GBP 25k (no, the account isn't in Britain but somewhere to the southeast, let's call it Falafeland :)), the refund might be a few hundred dollars a year. Once he is old enough to understand money a bit he'll be able to decide whether to spend or save that money...

In the meantime, I'm going through the hassle of getting a copy of my passport notarized. This isn't the normal method of proving identity in Australia, which is to go the post office or a police station to get the postal clerk or police officer to stamp and sign the copy as true (actually there is a broad range of people who can do this, including tertiary teachers like me). But this standard certification in Australia isn't valid outside the country, but a "notary public" is needed to certify the document. It seems these people have to be lawyers. Anyway, the bank in Chocolateland (yet another country) wants to get this notarized copy before they will release the main chunk of inherited money to me. Actually, there seem to be four levels of certification available in Australia: regular certification, "justice of the peace" (including police officers), notarization, and an "apostille". Initially, my brother said the Chocolateland bank wanted an apostille...

Self Managed Superannuation

I am exploring setting up a self managed superannuation fund (SMSF). I want to do this so that I can implement our target portfolio investment strategy and so I can put higher tax investments into the lower tax superannuation environment. Managed futures are a tax ineffective investment outside super when your marginal tax rate is 47%. Inside superannuation they will be taxed at 15%.

Setting up an SMSF is very complicated in Australia compared to the US where you can just open an IRA account with a broker like any other brokerage account and the only issue is limits on contributions and later on minimum withdrawals. For standard IRAs you pay tax on withdrawals only, on your regular tax return. The main reason Australian SMSFs are complex is taxation but some of the bureaucracy just seems to be for the sake of it... In Australia, pretax or concessional contributions are taxed at 15% (or 30% for high income levels) going in, and you can also make after tax contributions. Its necessary to keep track of which were taxed how. Then earnings are taxed at 15% (10% for capital gains) and can be offset by franking credits and foreign tax paid. When you finally withdraw your money, no tax is due and earnings of the account are untaxed if you set up a pension, though now there is a cap of $1.6 million on the amount of assets whose earnings are untaxed. So funds need to submit tax returns separate from their members. And they need to be audited annually and there are lots of ways they could become non-compliant with the rules. And an SMSF is a trust which is set up as a separate legal entity. You might also want to set up a company to act as trustee!

You could go to a lawyer to set up the trust and to a local accountant to help audit the fund and do everything else yourself. But there are many providers who streamline the set up and administration of SMSFs. You can get "year-end" administration which just helps get everything in order for the tax return and audit, or you can get a full daily service. Though I do our own tax returns, I have decided to go for the full daily service as I want to outsource this as much as possible (looks like I am going to have to do tax returns for my son too and am also looking at setting up a company...) and want to be confident that I am compliant with the rules, because the penalties for non-compliance are very severe.

This is a great site with information about different providers of services for self-managed superannuation funds. I visited the websites of all the providers that offer a daily service. Some sites have a lot information and some have next to none. The latter want you to phone them to give you the details. I have a strong preference for financial services that are as transparent as possible. I also investigated Commonwealth Securities and Dixon Advisory, which are not on this list.

Dixon are based in Canberra and I often go past their offices on Northbourne Avenue. Years ago, I used to read Daryl Dixon's column in the Canberra Times. Their service combines admin and investment advice and costs from $3,000 for a $333k account to a maximum of $6,000 for accounts above $666k. To make investments, you have to call their broker and the commissions for shares are 1.1%, which is capped at $400 for Australian shares and uncapped for foreign shares. I don't need investment advice and trading is way too expensive.

Commonwealth Securities is a more realistic option. Including audit fees, they charge a flat $3,000 a year. On a $900k account that is 1/3%, which is reasonable. Trading fees are 0.12% for Australian stocks, which is good though not the lowest, and 0.31% for US stocks and 0.41% for shares in the UK and many other countries, which is expensive but not as outrageous as Dixon. You can't trade CfDs (which are offered by CommSec for other accounts) or futures (which aren't offered by CommSec).

You can set up a trading account for an SMSF with Interactive Brokers, which can trade anything you like for low fees, and then find an administration provider who is prepared to work with them. Determining who can work with IB is what I need to do next. You can trade futures in an SMSF as long as it fits within the written investment strategy (yes, you are required to write one) and other risk related rules.

Two providers on my list, who have won awards and who I am going to investigate next, are Heffron and Super Guardian. I am impressed with the transparent information on Super Guardian's site. They also have an endorsement from Chris Cuffe. Super Guardian charge more the more investments you have. If we have up to 20 investments then they are a similar price to CommSec. Heffron charge a flat fee of $3,300 for their top level service.