POWERED BY MOMENTUM MEDIA
Super funds need different approach to volatility
Superannuation funds need to recognise that volatility in an equities portfolio is a two-dimensional problem that can erode retirement balances, Parametric believes.
The fund manager said too many responses to volatility were one-dimensional and looked only to smooth out the journey for members, ignoring the damage that volatility, or expensive volatility responses, can do to end retirement balances.
Parametric director for research and after-tax solutions, Raewyn Williams, said: "All approaches to volatility need to stack up against their ability to solve both problems for members. Funds should not be willing to casually trade off their members' destination (retirement savings) for a smoother journey, assuming they cannot deliver both".
Williams said the Financial System Inquiry comprehensive income product for retirement (CIPR) solution showed that it was not acceptable for a fund to deliver risk management at the expense of a member's income needs, or vice versa.
"The CIPR blueprint should further encourage superannuation funds to look for solutions to solve the journey and destination problems, especially as a growing number of their members move towards transition to retirement or retirement itself," Williams said.
"A viable equities approach to downside risk in volatile times is a solution that genuinely protects the member from the risks he/she cares about (like volatility or downside risk), but avoids costly protection solutions that undermine the member's capacity to keep building a retirement balance."
Recommended for you
As market volatility persists, some super funds are pivoting defensively, while others are strategically positioning to capitalise on emerging opportunities.
New data has shown a progressive deterioration in risk appetite among instos even prior to Donald Trump’s latest round of tariffs.
UniSuper has reached “peak investment” in US assets and is now preparing to reassess its exposures amid ongoing sharemarket volatility.
Investors have slashed their US equity allocations to the lowest level on record, according to new data from Bank of America.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
90.28 3 y p.a(%)
2
GAM LSA Private Shares AU I
37.08 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.44 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.12 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
28.28 3 y p.a(%)
