- Thursday, 19 April 2012 | Victoria Tait
A growing number of industry commentators back the 'lifecycle' approach to retirement savings whereby target returns are calculated by determining an investor's needs well beyond retirement and working backwards.
The strategy could be helpful to millions of Australians who cannot or will not actively engage with their own superannuation investments, a problem the government's MySuper reforms aim to solve.
However, Russell Investments Australasian chief executive Chris Corneil said age is not the only basis for a lifecycle investment strategy and the industry needs to swiftly develop a second generation of the vehicles.
"Significant enhancements need to be made to lifecycle funds to make these strategies relevant to the MySuper debate," Corneil said in a report published yesterday.
"Lifecycle funds can prove beneficial for those who are unwilling or unable to manage their investments regularly - the disengaged members that MySuper is concerned about."
Corneil added that the investment strategy could help protect investors from their own behavioural biases that often lead to selling at troughs and buying near peaks.
Milliman principal Wade Matterson backed lifestyle investment but said it needed "a personalised overlay".
"My issue around that is it's more around data. Do funds have adequate data and information on their members to then make [lifecycle] decisions on their behalf? Some funds have better information than others," Matterson said.
"If we kind of accept that we have to grab people in different cohorts, then the question becomes, 'How do I identify which cohort you should be in as my fund member?'"
MySuper is part of the government's Stronger Super plan which aims to whittle away some of the $20 billion in unclaimed superannuation money.
"The fact that we've gotten to this point where people can have multiple superannuation funds scattered around the place means we've let them down," Matterson said.
"That has created massive inefficiency within the industry. Addressing that will get a lot of funds and a lot of members to a point where actually they can make a better effort in terms of auto-piloting an investment option for someone as long as they have confidence in the information they've got about their members."
Latest from InvestorWeekly
- CFS enhances Essential Super
- Financial Synergy launches SuperStream platform
- WaveStone launches Aussie equities fund
- ANZ widens China Development Bank agreement
- Japan FTA to bolster financial services export: FSC
- Westpac establishes Shanghai sub-branch
- NAB invests in Misys trade finance platform
- NGS Super rebrands
- AMP Capital raises US$450m for infrastructure debt fund
- RBA upbeat about economy, says HSBC
- A weather forecast for 2014
- Is Asian turbulence a win for China?
- Why Detroit’s honest self-renewal is a lesson for Japan
- Volatility means opportunity for fixed-income investors
- US Fed likely to stick to existing policy
- Asian bonds offer value after Fed-induced sell-off
- Convertible bonds: solid foundations are needed when reaching for the upside
- ING DIRECT urges third parties to prepare for Basel changes
- A straight-forward channel
- Crystal balls and consistent returns
- ANZ appoints insto head of global banking
- Bank of New Zealand appoints CEO
- Praemium appoints director to board
- T. Rowe Price appoints insto sales manager
- Wilson HTM appoints managing director
- BTIM appoints non-executive director
- Westpac Institutional Bank adds to Asia Advisory Board
- ANZ CIO steps down
- Legg Mason appoints director of sales
- DST Global appoints solutions manager