Clients need outcome-orientated, more actively managed multi-asset portfolios as focus shifts from pre-retirement to post-retirement, Russell Investments chief executive of Asia Pacific, Alan Schoenheimer said.
“We believe that these are the sorts of portfolios that people are going to need,” he said.
Mr Schoenheimer said that he believed portfolios needed to be managed differently to deliver more certain outcomes.
According to government statistics, there are approximately 5.5 million baby boomers, many of which have begun to turn 65 years of age.
“We firmly believe that, until now, the way you manage portfolios has been focused on the pre-retirement phase,” Mr Schoenheimer said.
“Everybody is living longer, which means that the money has to last longer.
“We now come to a point where the baby boomers are entering retirement, there’s going to be an exponential growth in post-retirement assets and we believe they have to be managed differently.”
Mr Schoenheimer said that there were increasing signs that portfolios needed more asset classes, with more adaptive asset allocation techniques.
“We need a much richer and varied set of components in portfolios in order to deliver the outcomes that investors are expected to achieve,” he added.
Mr Schoenheimer said that annuities can no longer be relied on, “Annuities are not the answer for retirees in this country.”
“One of two things has to happen: We can either all rely on the government … or we’re going to have to have our own money that we’re managing in an appropriate fashion to make it last the distance.
“We firmly believe that the way you manage money in retirement to make it last as long as possible is to have outcome-orientated, actively managed, multi-asset portfolios.”
Mr Schoenheimer said that the global financial crisis had highlighted the importance of implementation and the speed of decision-making
“The world is speeding up and the investment world is getting more concentrated. Traditional equities and other assets didn’t give investors the diversification they should have.”
He added that three-monthly board meetings and strategic asset allocation reviews every three years were no longer appropriate.
Russell Investments global chief investment officer Peter Gunning said in response, there had been a shift towards a more holistic approach to portfolios.
“What we’re seeing is that clients have gone back to this idea that they need someone to oversee the entire portfolio,” he said.
“The decomposition model is actually getting re-bundled and not to make a balanced-type strategy, but rather, one where there’s more componentry, where someone is looking holistically.
“The industry itself recognises that there’s a way to build outcome-orientated portfolios that still need diversity within the individual building block but have a more holistic approach.”
