An investment manager has forewarned that a seismic shift is coming to the investment landscape and the industry has been struggling to cope with it.
Pentalpha Investment management has reported that the industry is shifting from wealth accumulation to utilisation as more than 1 in 5 Australians transition away from full-time employment.
The shift from utilisation after a lifetime of accumulation is challenging to both investor and investment manager alike according to the firm.
Pentalpha’s executive chairman Denis Donohue said that the shift has placed greater emphasis on certain elements of investing like returns being fit-for-purpose and investment liquidity.
“Effective safeguards or protection against catastrophic investment losses where recovery is time constrained and capital growth for the purpose of offsetting inflation rather than targeting speculative gains or return maximisation are some of the challenges to be faced during this shift,” he said.
These challenges are amplified by parallel shifts negatively impacting on investments traditionally relied upon during the utilisation phase of an investment cycle said Mr Donohue.
“The prices and rental yields of traditional property investments held for income remain under pressure, and the challenges of their illiquidity and management costs often make them uncompetitive net of fees among other amplified challenges,” he said.
Lifestyle circumstances have also changed, said Mr Donohue, as people are spending more on themselves and living longer as well.
“Baby Boomers are having to financially support their children and grandchildren more than any time in the past while also increasingly seeking to pass on financial legacies,” he said.
Mr Donohue said that many investment managers had been slow to meet these needs, but the tide was slowly turning to face the new needs.
“The investment industry remains focused on the ‘wealth accumulator’ and has been slow to meet changing investor needs.
“Fortunately, a new wave of investment managers have taken up the challenge,” he said.
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