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As more Australians take control of their retirement savings through Self-Managed Super Funds (SMSFs), the need for low-volatility, income-generating investments is growing stronger. In the wake of market turbulence in 2024, many SMSF trustees are revisiting their asset allocations—looking beyond equities and term deposits to investment-grade fixed income bonds.
At ARC Capital Ventures, we’re seeing a notable increase in interest from SMSF trustees aiming to diversify into bonds. With predictable income, enhanced capital stability, and potential tax advantages, bonds are forming the core of long-term wealth preservation strategies inside SMSFs.
“Post-2024, trustees want more control, less volatility, and smarter yield. Bonds are providing exactly that,” says Marios Anastasiou, CEO of ARC Capital Venture.
Why SMSF Trustees Are Rethinking Asset Mix
The traditional SMSF allocation—dominated by ASX-listed shares and cash—has been under pressure. In 2024, market volatility spiked due to geopolitical tensions, slowing global growth, and inflation uncertainty. Many trustees saw drawdowns in equity portfolios and realised that even high dividend-yielding shares came with capital risk.
Meanwhile, term deposit rates remained stubbornly low, with many still offering returns under 5%—barely covering inflation.
In contrast, corporate bonds offered yields between 6% and 7.5% and remained largely insulated from daily market swings. It’s no surprise that SMSF investors are now allocating a greater portion of their core to bonds.
Case Study: A Diversified SMSF Bond Allocation
ARC Capital’s analyst team recently constructed a model portfolio for a 60-year-old SMSF trustee with moderate risk tolerance. The portfolio focused on capital preservation and monthly income, incorporating:
This blend of banking and insurance sector bonds, layered across currencies and maturities, created an income-generating foundation with an average yield of 6.6% p.a.—and significantly lower volatility than equities.
“We’re using global issuers to add stability and diversification to SMSF portfolios. Bonds from institutions like JP Morgan and AXA are providing income that’s both secure and globally resilient,” notes Anastasiou.
Tax and Yield Efficiency Inside an SMSF
One often-overlooked advantage of bonds is their tax efficiency when held inside a superannuation structure.
In Australia, SMSFs generally pay a concessional tax rate of 15% on investment income. Once in pension phase, income from assets supporting retirement pensions can be tax-free—including bond interest payments.
This makes bonds an attractive strategy for pre-retirement and retired trustees alike, particularly when compared to high-franked dividend shares, which may carry volatility and payout uncertainty.
Furthermore, fixed income payments can be timed to align with SMSF liquidity needs—whether monthly, quarterly, or annually.
Sector Spotlight: Financials and Insurance for Stability
At ARC Capital, our bond desk has strong conviction in financial and insurance sector issuers. Why?
Two current ARC bond picks—JP Morgan and AXA SA—offer investors access to global financial stability and yield, while mitigating the downside risks seen in equity counterparts.
ARC Capital’s internal analyst research shows default rates on investment-grade financial bonds under 0.1% annually over the past decade.
Compliance Considerations for SMSF Trustees
SMSF trustees are bound by certain obligations under the Superannuation Industry (Supervision) Act (SIS Act), particularly around:
Bonds—especially when laddered or diversified across issuers—support compliance with all these mandates. They offer stable, known cash flows, portfolio balance, and options for currency hedging.
ARC advisors work with trustees to document how fixed income supports their SMSF strategy, helping ensure compliance while enhancing outcomes.
“Whether you’re a first-time SMSF investor or a seasoned trustee, bonds are a responsible and compliant way to anchor your income strategy,” adds Anastasiou.
Conclusion: Building a Core That Lasts
As SMSFs grow in popularity—there are now over 600,000 active SMSFs in Australia—the conversation is shifting from chasing high growth to preserving and drawing income.
For trustees looking to reduce risk, secure predictable returns, and maintain full control, investment-grade bonds are becoming the core allocation of choice.
At ARC Capital Ventures, we provide direct access to:
Download the ARC SMSF Bond Portfolio Guide
Ready to see how bonds can strengthen your SMSF? Request our free Fixed Income Bond Comparison Guide, featuring top picks, model allocations, and tax tips tailored for Australian trustees.