The design of MySuper products must cater for members who are approaching retirement and have "a unique blend of short-term and long-term investment requirements", according to Rice Warner.
In a report titled Asset Allocation in MySuper, Rice Warner argues for an investment methodology that separates assets into two pools: a liquidity pool invested in cash and non-volatile assets to meet expenditure commitments, and a growth pool to combat inflation and longevity risk.
People in retirement or approaching retirement must be allowed to have multiple portfolios to provide for both their short-term and long-term needs, said the report.
The first step superannuation funds must take is to divide their membership into age cohorts, said Rice Warner.
For those up to age 50, a standard default portfolio is the "best option", according to the report.
The asset allocation must target "growing industries where returns are likely to be strong", and the geographical location of each investment must be considered to uncover opportunities, said Rice Warner.
For pre-retirees (age 50-65), a single default MySuper product is no longer appropriate because members will be looking to move some of their money into cash, said the report.
It is up to superannuation funds to engage members in this cohort and offer intra-fund advice "targeted at implementing a personalised investment strategy aligned to anticipated investment needs", said Rice Warner.
For retirees, "investment in a single composite portfolio is inappropriate and inadequate" – and the design of the MySuper retirement product "must allow for a low cost liquid asset portfolio", according to the report.
