SMSF with CFDs...

[theasxgorilla]

http://www.esuperfund.com.au/cfdhowitworks.aspx

Can this be real?

Aren't there some restrictions for SMSFs regarding leverage, or it is just borrowing? Or are CFDs so "unreal" that it's not really borrowing?

And what about going short? Isn't that disallowed as well?

 

[tech/a]

WOW.

My understanding is that you cannot leverage your funds or borrow against them,or use them as security.
MoneyTree has some way of getting partially around this using installment warrents,I think.

The only way I could see this being allowed would be if you didnt use the leverage component of CFD's.

Be interested in hearing from those in the know!

 

[reece55]

Guys
It's ok as long as you have a guaranteed stop loss facility.

In my opinion though, if they allow warrants, what's the difference in using CFD's? I am with IG Markets through my SMSF. ATO takes the view that it is a negotiable instrument between the provider and the SMSF - as long as there is stop loss protection, then the trustee is not breaching the SIS.

Cheers

<Disclaimer: This is not advice>

 

[reece55]

http://www.esuperfund.com.au/cfdhowitworks.aspx

And what about going short? Isn't that disallowed as well?

Still ok ASX Gorilla.

The key issue here, in the ATO's view, is are you using assets of the fund for collateral? A CFD is really a contract between the provider and the SMSF - you don't actually own the underlying share yourself, but rather a negotiable instrument. And provided you have a GSL and it is an allowable instrument in your trust deed and your investment policy says that they are apart of your investment strategy, you will be ok.

The problem with traditional short sell methods is they collateralize existing shares - hence why it is normally a no no for super funds.

Cheers

 

[theasxgorilla]

Hi Reece,

Thanks for the quick response.

Wow! That is amazing. I didn't realise that SMSF had all these possibilities. It's a tremendous positive IF you can trade and manage risk effectively...but on the other hand, does anyone else foresee some clever people doing more harm than good to their retirement income accounts?

 

[reece55]

Hi Reece,

Thanks for the quick response.

Wow! That is amazing. I didn't realise that SMSF had all these possibilities. It's a tremendous positive IF you can trade and manage risk effectively...but on the other hand, does anyone else foresee some clever people doing more harm than good to their retirement income accounts?

HAHAHAHA.......

Yep, already seeing it in 06 super fund returns - some trustees thought this would be the way to riches for them..... turns out it ended up going the other way.

Excellent if used correctly however. Much better than warrants, because at least you don't have MBL/UBS/ABN cheating you out on the wide spread! Plus, unlike most warrant, you will have delta 1 with as much leverage as 20:1 on a leading stock.

Cheers

 

[Halba]

sounds risky i wouldn't blow my super funds on cfds

warrants are okay, but you can lose similarly with them...however on IZQ and some IZZ series you can claim interest as deductions, and can exercise them or roll them over.