Defined benefit outperforms defined contribution: PIMCO
Defined benefit (DB) default funds outperformed defined contribution (DC) default funds by over half a per cent per year over the past 15 years, with less volatility, according to global bond fund manager PIMCO .
Although they have fallen out of favour in Australia, DB funds have outperformed DC funds by 0.57 per cent per year for a cumulative total of 9.12 per cent over the past 15 years, according to PIMCO research paper 'Defined Contribution Funds: Target setting can pay off'.
This demonstrates the benefits of an investment approach with a clearly defined target, or minimum required internal rate of return, in achieving superior investment returns, said PIMCO account manager Sara Higgins.
"Research suggests that a focus on target setting for overall portfolio performance and risk outcomes leads to better performance. We need to think about the objective of a super fund to determine what constitutes a good outcome," she said.
A desired outcome could be the likelihood of meeting a replacement income target for a certain proportion of members, based on liability that lowers the level of risk as it approaches the target. "This adds to the discussion around the evolution of a dynamic target date or lifecycle approach," Higgins said.
Recommended for you
Financial Services Minister, Stephen Jones, has assured the cost and time to enter the financial advice profession will soon be halved, as shadow treasurer Angus Taylor pledges to reach 30,000 advisers.
The positive results of the latest financial adviser exam have helped the advice profession reach 15,600 yet again, according to Wealth Data analysis.
Financial advice firms have told Adviser Ratings they are planning to increase their compliance spend by almost a third, including on enhancements to their cyber security which ASIC has identified as an enforcement priority.
The digital advice platform is officially launching into the financial advice sector, offering up its services to practices as a means of engaging with the next generation of clients.
