Wealth manager Colonial First State (CFS) is looking at introducing a life-cycle investment strategy as part of its MySuper product.
Life-cycle funds consider a person's age or their target retirement date when determining the appropriate investment strategy and level of risk in a portfolio. Under the Stronger Super reforms, superannuation trustees will be allowed to use these funds in their MySuper option.
"Conceptually we are interested in the idea. We have not made up our mind to offer the strategy, but we are researching into the viability of a life-cycle fund," CFS general manager of product and investments Peter Chun said.
Chun said low-cost superannuation funds must also deliver performance for their members.
"A low-cost fund does not mean a poorly performing fund. We want to be able to provide a competitive fee, but also bring value to members on a net-risk-adjusted-return basis," he said.
He said there were some benefits in a life-cycle strategy, particularly as it protected investors against downside risk.
"People nearing retirement have the ability to de-risk their portfolio. A life-cycle strategy allows them to lower their risk assets closer to retirement," he said.
CFS currently has a 70/30 balanced fund as a default strategy in its FirstChoice platform.
"We are exploring whether to offer this fund as a MySuper strategy or whether we offer a life-cycle strategy. We have not yet made up our minds on the benefits of a life-cycle fund," Chun said.
The introduction of MySuper would ensure greater comparability between funds, particularly on the issue of fees, he said.
He said some wealth managers quoted fees on a net-fee-after-tax basis in their product disclosure statements, which on face value made them look cheaper.
"One of the benefits of MySuper is that it will lift transparency in the industry and force product providers to have a greater level of comparability," he said.
