'Bondification' of equities to stay

23 June 2015
| By Jassmyn |
image
image
expand image

Australians need to rethink domestic equities bias and look overseas for deeper markets and better opportunities if they want to capture yield in retirement, Principal Global Investors believe.

With continued volatility of equities and a once-in-a-generation bull market, investors are bouncing between caution and fear as demand for defensive stocks drive the 'bondification' of equities, a commissioned report by Principal Global Investors has found.

The CREATE-Research report, "Pragmatism Presides, Equities and Opportunism Rise", found pragmatism defines investors' approach to equities and the 'bondification' of equities will continue to gain traction.

Principal Global Investors (Australia) chief executive, Grant Forster, said: "Investors are chasing returns, not asset classes, and this may mean a re-thinking of traditional asset allocation models."

Forster said the traditional thought of investing in 'growth' asset classes when investors are young and investing in more risk-averse assets when retiring or near retirement needs to change.

According to the report, 70 per cent of surveyed respondents believe that over the next three years, pragmatic investors will chase returns, not asset classes and investors expect the highest returns to come from private equity.

With the report focusing on investors' sentiment about the 'cult of equities', in light of the 'lost decade' followed by the bull market of the last three years, 79 per cent of respondents do not believe the cult of equity is dying.

CREATE-Research chief executive, Amin Rajan, said: "Investors understand that future returns from most asset classes will be much lower than in the past, and with bond valuations at historic highs, it's no surprise that equities have been in favour over the past few years."

"This is what is meant by the 'bondification' of equities. Investors know they can't afford to be too risk averse in an environment of artificially suppressed interest rates, so they are hoping for the best of both worlds," he said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

1 year ago
Kevin Gorman

Super director remuneration ...

1 year ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

1 year ago

The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation ...

3 hours ago

Super funds had a “tremendous month” in November, according to new data....

4 days 2 hours ago

Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion....

4 days 7 hours ago