Superannuation members should monitor their fund’s risk, especially unlisted assets that are labelled as defensive but as less liquid than other assets, according to AMP.
AMP Australia’s chief investment officer, Lakshman Anantakrishnan, said the current market fragility should encourage Australians to be aware of the risk their super fund was taking and how it changed risk weightings overtime, if at all.
“An increasing number of industry and retail funds, for example, are investing in unlisted property and infrastructure labelling the investments as defensive,” he said.
“While some of these assets may share characteristics with traditional defensive assets, such as an income stream, the more important issue is how they behave during periods of market stress.
“These assets are less liquid and valued more infrequently than other assets, so time will tell how they come through the current market falls. However, contrasting the performance of the S&P Global Infrastructure Index, which has declined 31.7% since the start of the year, with the positive returns of the bond index – an asset traditionally classified as defensive – shows that a closer look at creating common classification standards is needed to help Australians make informed decisions.”
Anantakrishnan said the current situation was more uncomfortable for those planning to retire in the next few years who continued to hold a high weighting of growth assets in their super.
“Now, more than ever, they’ll be acutely aware that it’s the balance you end up with at retirement that counts, not the balance three months, or three years before,” he said.
“The good news is that many Australians are in default super funds which progressively de-risk as retirement nears. That is, their super provider rebalances away from assets, such as equities, into bonds and fixed interest assets as members age.”
Anantakrishnan noted clear and calm heads were needed in times of market volatility and recognition that super was a long-term investment and that younger Australians’ balances would recover and grow over time.
