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Reduce reliance on equities, JANA
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| Ken Marshman |
Superannuation trustees need to reduce their reliance on equities to deliver returns if they want to reduce their risk exposure, according to JANA Investment Advisers' head of investment outcomes, Ken Marshman.
Speaking at the Association of Superannuation Funds of Australia conference, Marshman said it was unlikely that the industry would be able to reduce its risk exposure to equities in the future, and the industry would have to reduce its reliance on equities itself as a result.
The financial crisis had proven that investment portfolios were taking on a lot more investment risk in equity than they thought, and part of the cause was the tendency of super trustees to introduce risk into asset classes that were meant to increase diversity, Marshman said.
“It was unlikely that we will want to, or can, reduce our risk levels that much. And in the context of that, I think our responsibility is therefore to lighten our reliance on equities within portfolios to deliver our returns,” he said.
The industry needed to turn to tried and tested methods such as fixed interest and more non-market based strategies to deliver returns to investors, he said.
More active management was also a technique that would be needed, he said.
Graham Rich, head of PortfolioConstruction Forum, said there needed to be a return to back to basics principles of diversification rather than “new tricks” of diversification that were little understood.
Many Australians had failed to appreciate the impact of the financial crisis and there would be more ramifications for the market that would affect equity returns over the next two years, he said.
AUTHOR
Mike Taylor
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