POWERED BY MOMENTUM MEDIA
The ‘diabolical’ threat of sequencing risk
The threat of sequencing risk is leaving retirees and pre-retirees in danger when there is a market collapse, according to Cor Capital.
This was because, not only did they lose out during the collapse, their age meant there was minimal time for them to regain their losses, known as sequencing risk.
It was particularly in the case in the recent crash as it followed a particularly long bull run for equities and investors had become complacent with receiving high returns.
Tom Rachoff, director at fund management firm Cor Capital, said: “Sequencing risk represents the danger of experiencing poor investment performance at the worst time. While some investors have decades to ride out volatility and heavy capital losses, investors nearing and in retirement are not among them.
“They need to pay greater attention to the risk of permanent capital loss and the sequence of returns while still attempting to maximise return.”
With superannuation funds being tilted towards growth assets and unlisted assets such as infrastructure, this sold off in a market downturn. This was the opposite of what investors had expected the funds would do as many believed their focus had been on capital protection.
Rachoff said: “Many of these investors did not realise that they were ‘at risk,’ and were sitting on a rollercoaster ride through the sequencing risk zone, with a better-than-even chance of succumbing to human behaviour if markets got stressed. And they got very stressed.
“Ideally the pre-retiree and retired investors would have a portfolio that can perform well in a bull market phase, but more importantly, work to protect capital within the extreme ‘risk off’ environments.”
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
Recommended for you
Future Group is set to take on nearly $1 billion in funds under management (FUM) and welcome more than 100,000 new members following two significant successor fund transfers.
Insignia’s Master Trust business suffered a 1.9 per cent dip in FUA in the third quarter, amid total net outflows of $1.8 billion.
While the Liberal senator has accused super funds of locking everyday Australians out of the housing market, industry advocates say the Coalition’s policy would only push home ownership further out of reach.
Australia’s largest superannuation fund has confirmed all members who had funds stolen during the recent cyber fraud crime have been reimbursed.
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(%)
