Capital-protected products have attracted renewed interest from superannuation funds for their potential application in retirement products.

Pension members are likely to want to retain a certain exposure to growth assets in their portfolios, but they do not have the ability to withstand large downturns.

The traditional approach of increasing the allocation to bonds or cash was unlikely to work in the current climate, Frontier Investment Consulting deputy director of consulting Kristian Fok said.

"Obviously, the current economic climate is highlighting it, but we are working on the basis that there is going to be a lot more volatility in the next three or four years as the whole de-leveraging process will work its way through. So it's quite a more risky world," Fok said.

"A lot of the time we're talking about: 'People have a long time to invest, even when you are in retirement.' But when you take into account the added volatility, that adds a bit of a different perspective.

"For someone who is actually in retirement stage, you are realising your assets and locking in losses. So it's quite clear that there needs to be a bit of a rethink about the starting point."

Industry funds have come to realise pensioners will quickly take up a larger slice of their business as the first baby boomers start their transition to retirement this year.

"A lot of our clients are not-for-profit funds. Their strength has been in the accumulation phase, but the issue is that they don't do things for clients with bigger balances and they are going to go elsewhere and they are the ones that you want to keep for longer. There is a lot more focus on that. So we are doing research around how we can best structure the risk and return," Fok said.

"We're looking at strategies to loosely hedge tail risk. It could mean more investment strategies like derivatives around equities, so you give up some of the upside to really reduce the impact on the downside, the collar programs.

"One of the things that we did look at was the life-cycle approaches, but the problem is that you need to get the de-risking right.

"A lot of the examples that we have seen probably had too aggressive de-risking.

"Particularly in an environment where those volatile investments are going to give you low returns, it is not necessarily going to be the solution either."

He said he expected Frontier would develop a range of potential solutions over the next six months and would also publish a research report.

Innova Asset Management managing director Dan Miles said capital guarantee products also had never really taken off because they were exorbitantly expensive.

"The problems you had with structured products in the past were that the fees were really high," Miles said.

"You also had a guarantee, which didn't really make any sense because all you were guaranteeing was that your money would be worth less than at the beginning, because it is going to be down on inflation-adjusted terms.

"They were also close-ended, which doesn't really work."

Innova Asset Management is a joint venture with Ray Miles-led dealer group Fortnum Financial Advisers, which is supported by Onepath's RI Advice Group.

Fortnum is looking to launch a new retail superannuation platform, e-Clipse Super, next month and this platform will offer members a capital-protected overlay that makes use of a strategy managed by actuarial and financial risk management firm Milliman and its affiliated business, P².

"What we are doing with Milliman and P² is that a client's risk assets - and this is only risk assets; you don't have to pay a fee over your cash, which is what you see in most other products - an allocation goes into a protection account and that is used by Milliman to hedge the risk," Dan Miles said.

"They offset those risks in the futures market by taking a short position, effectively. So in a long bull market there is a slight drag on performance, but in a bear market it is unbelievable valuable."

The reason why it was much cheaper than traditional structured products was because it was in many ways a more simple construction with fewer layers of fees, he said.

Investors are not offered a guarantee, but a strategy to reduce downward risks, which makes it unnecessary for the provider to take on the liabilities on their balance sheet.

The investors only pay a fee over the assets they want to protect and these are offset by investments in exchange-traded futures.

This method cuts out investment banks and expensive over-the-counter derivatives.

The publicly-listed nature of the instruments used also gives a higher level of transparency, liquidity and daily pricing.

"It is not a guarantee. If clients can understand that this is a protection strategy, not a guarantee, then it is available to anybody that requires it," Dan Miles said.

"But we generally see that at the higher net worth end of the market, which has a greater understanding of how the equities market works and that you can't get something for nothing."

Milliman financial risk management practice leader Wade Matterson said the platform had attracted more interest from industry funds as well, because they could introduce it as a simple add-on service.

"The real fascinating thing there is that it is highly flexible," Matterson said.

"It works well within superannuation funds that don't want to build a whole bunch of different account products, but do want to give their members the choice to elect a risk management overlay that is relevant."