Lonsec conducts a review of its strategic asset allocation and model portfolios every two years.
In its most recent reviews, the research house has reduced its overall total return targets due to “lower long-term expected return forecasts for most asset classes including global listed property, global bonds and cash”.
Lonsec has also put in place a “more balanced allocation between global and Australian equities”, which it says reflects “narrowing long-term expected returns” for the two asset classes.
In addition, Lonsec has increased its allocation to alternative assets – including ‘conservative’ alternatives.
Lonsec investment consultant Eleanor Menniti said the reviews noted that alternatives will play a vital role for investors to achieve their objectives, allowing them to diversify their risk exposure for traditional assets.
“A common view is that alternatives are return boosters in a low-return environment, when improved performance is linked to the diversification benefits this asset class provides rather than the inherent nature of the assets or the investment style used,” Ms Menniti said.
“Lonsec has positioned the portfolio with exposure across a range of approaches to ensure portfolio performance is not tied to one specific market environment,” she said.
