POWERED BY MOMENTUM MEDIA
Lifecycle strategies need care
Superannuation consultancy Watson Wyatt has warned that so-called 'lifecycle' investment strategies aimed at protecting super fund members through volatile times can be destructive if not implemented properly.
The head of investment strategy at Watson Wyatt, Tim Unger, said while the lifecycle approach continued to be a robust answer in dealing with market turbulence, members could be let down if it was badly implemented through an overly simplistic investment design, poor switching mechanisms or excessive cost.
Watson Wyatt's principal consulting actuary, Nick Callil, said better member profiling and greater engagement with members were the keys to improving the implementation of the investment proposition.
"What lifecycle investing needs is a flexible framework within which members can follow a more personalised strategy rather than a simple one-size-fits-all solution," he said.
"While the principle of a lifecycle approach can be a sensible way to control risk in a member's portfolio, its delivery has not evolved sufficiently in the past 20 years to be effective today, and there has also not been sufficient attention paid to how the Australian superannuation environment differs from overseas pension markets," Callil said.
He said in the UK, for example, members were required to purchase an annuity on or soon after retirement, in which case significant de-risking prior to retirement made sense, while in Australia most retirees used account-based pensions and could also rely, to some extent, on the age pension.
Callil said this meant there was less of a need to significantly de-risk the investment portfolio before retirement.
AUTHOR
Mike Taylor
Recommended for you
SuperRatings has shared the top 10 balanced options of the last financial year.
Rest Super remains “fully committed” to equities, even as it anticipates higher market volatility than experienced in previous decades.
Australian superannuation funds have again generated strong returns for FY25, with the median growth fund returning 10.5 per cent for the year, according to Chant West.
The US remains a standout destination for innovation and commercialisation, according to MLC Asset Management chief investment officer Dan Farmer.
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(%)
