Standard Life urges risk-based approach

Investors need to adopt a risk-based approach to portfolio construction amid the current market volatility, according to global fund manager Standard Life Investments.

The company has predicted further considerable market volatility this year, and its UK-based investment director for Multi-Asset Investing David Millar has advocated a risk-based approach.

Speaking in Sydney this week, Millar said different investment strategies would behave differently over time and the challenge was to blend them to constrain risk. 

"Superannuation funds have traditionally hoped that strategic asset allocation, with a large proportion of the fund allocated to equities, will provide them with the cash-plus return outcomes they need to fund their members' retirements," he said.

"In Australia this has worked relatively well until recently; however economic conditions have changed and investors need to adopt new strategies to constrain risk," Millar said.

"The aftermath of the global financial crisis will be a long and complicated one, for countries and investors," he said. "The corporate sector can still perform well. However investors should expect continued market turbulence.

"Volatility in asset markets will create tactical opportunities for investors, and now it is increasingly important for investors to find other ways of investing to optimise returns for retirement," Millar said.