POWERED BY MOMENTUM MEDIA
New investment approaches needed for retirees: AMP Capital
While current investment approaches in superannuation serve those accumulating super well, there is opportunity for funds to create more bespoke investment approaches for those who are in the retirement phase, AMP Capital believes.
The firm’s senior portfolio manager, multi-asset group, Darren Beesley, said that differences in retirees’ super objectives meant that one-size-fits-all investment practices used in the accumulation phase don’t always suit those in drawdown.
He pointed to defining risk by the growth/defensive split, underutilising tax trade-offs, holding a static asset allocation, having less focus on inflation risk and thinking ‘defensive’ assets are actually defensive as some such investment practices.
“It’s no longer just about total returns within a growth/defensive bucket,” Beesley said.
He believed that superannuation funds needed to ensure that retirees’ portfolios had the following attributes designed to address risks and needs in retirement:
- Defining risk by what could be lost in a stressed environment;
- Hedging against large losses using tactical tail risk hedging instruments such as options;
- Factoring in the tax implications of franking credits;
- Applying dynamic asset allocation to avoid expensive asset classes and protect capital;
- Explicitly thinking about the risk of inflation to the retiree and holding inflation hedges; and
- Skewing the portfolio toward income where reasonable, but not at any price.
“As the amount of assets entering retirement continues to grow, we believe the industry will invest differently for those in retirement. Risk needs to be defined differently, tax needs to be accounted for, and the stability of return needs greater focus,” Beesley said.
He warned that investors should be asking whether their post-retirement funds were making such adjustments.
Recommended for you
Superannuation funds have posted another year of strong returns, but this time, the gains weren’t powered solely by Silicon Valley.
Australia’s $4.1 trillion superannuation system is doing more than funding retirements – it’s quietly fuelling the nation’s productivity, lifting GDP, and adding thousands to workers’ pay packets, according to new analysis from the Association of Superannuation Funds of Australia (ASFA).
Large superannuation accounts may need to find funds outside their accounts or take the extreme step of selling non-liquid assets under the proposed $3 million super tax legislation, according to new analysis from ANU.
Economists have been left scrambling to recalibrate after the Reserve Bank wrong-footed markets on Tuesday, holding the cash rate steady despite widespread expectations of a cut.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom 465 Calder Road Calder
99.46 3 y p.a(%)
2
DomaCom DFS Mortgage
95.46 3 y p.a(%)
3
Global X 21Shares Bitcoin ETF
78.55 3 y p.a(%)
4
BetaShares Crypto Innovators ETF
50.39 3 y p.a(%)
5
Global X GlobalX FANG+ ETF
47.50 3 y p.a(%)
