Announcing a new suite of three Inflation Plus portfolios, MLC chief investment officer Jonathan Armitage told InvestorDaily that even though inflation isn’t necessarily on people’s radar screens or the front page of newspapers, it is “definitely something we’re worried about”.
Central bank policies, quantitative easing policies and low interest rates all add to the current global inflation concern.
“These are unorthodox and experimental policies and you can’t know consequences, but historically these sorts of behaviours lead to higher inflation,” Mr Armitage said.
Although there may not be an immediate risk to investor portfolios, inflation can be “insidious” because it acts like a tax on portfolios and redistributes money away from people with savings, unless they can grow their assets, he continued.
“It’s a silent tax that creeps up. It’s only afterwards that you realise inflation has taken away [a proportion] of your assets. To help people in investment portfolios, whether pre- or post-retirement, you should have part of the portfolio designed to deal with the potential threat of inflation,” Mr Armitage said.
Susan Gosling, head of investments, MLC Investment Management, told InvestorDaily the three portfolios – conservative, moderate and assertive – are each designed to deliver inflation plus returns over a set period and are more flexible in their allocations than many portfolios as they aim to control inflation within the portfolio.
The equity components try to get a total return outcome because “if we beat the benchmark by three per cent but the market is down 10 per cent, that doesn’t meet our investment objective”, she said.
“We now have fully-priced equity markets, we have got low bond yields, that’s a challenging starting point and there has to be some uncertainty about if you hold a static portfolio what it will deliver,” she said.
“We have to do something differently and manage the risk ourselves,” she added.
“More and more people are moving towards retirement and they need something that’s not going to devalue their retirement strategy.”
MLC said the new portfolios are based on the Long Term Absolute Return Portfolio it has run since 2005. The Inflation Plus portfolios are available through MLC Investment Trust, MLC Wrap and MLC Navigator (and badges).
