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Investors after absolute returns for their retirement portfolios
Fixed income alternatives are becoming increasingly popular in retirement portfolios as investors look for absolute returns, according to John Wilson, head of PIMCO in Australia.
There is now a growing interest from investors in the accumulation phase seeking products that diversify away from traditional equity risk approaches, he said.
"Being a fixed interest manager, you equally weight risk and return, whereas an equity manager may be more inclined perhaps to be a bit more optimistic than a bond manager," he said.
Wilson said PIMCO's Multi Asset Volatility fund was developed in response to current market conditions where there had been either "an excess of euphoria and an excess of pessimism".
In these economic conditions, asset classes tend to move away from "fair value" and take on volatility characteristics that might not be consistent with the underlying nature of the asset. It is in this environment that alternatives can create value for investors, he said.
"Superannuation funds are trying to solve the problem of a growing number of retirees, and they need to consider a portfolio that generates income a little differently than in the past," Wilson added.
He said over the next five years he expected to see allocations to fixed interest increase as investors seek capital stability and recurring income for their retirement portfolios.
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