Fixed interest has a role to play in default superannuation fund portfolios, but the debate must not become clouded by short-term considerations, says Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos.
Her comments came in response to calls by former Secretary to the Treasury Ken Henry for superannuation funds to reassess their high allocations to equities.
Henry also discussed the possibility of superannuation funds increasing their allocation to bonds – particularly the corporate bond market, which is relatively undeveloped in Australia.
"The discussion about the role of fixed interest investment in superannuation portfolios is not about the relative attractiveness of bond investments today," said Vamos.
"What the industry is debating is the long-term structure of superannuation portfolios and the appropriate place of fixed interest investments, given the changed investment landscape and ageing demographics," said Vamos.
She agreed with Henry that one of the biggest issues facing superannuation investors is "sequence risk" – that is, when an individual enters or leaves the workforce.
"The impact of a significant capital market event on a superannuation account balance is very different depending on whether you are 16 or 60," Vamos said.
For that reason, ASFA has backed the inclusion of lifecycle products in MySuper, Vamos said.
"We should expect that the ageing of Australia’s population will lead to increased demand for fixed income investment through retirement income products," she said.
