Baby boomers missing out on recovery gains
Baby boomers are likely to miss some of the gains in market recovery as volatility drives them to reduce their equity portfolio in a down-turn, according to a report.
Colonial First State Global Asset Management's (CFSGAM) "Investor Insights" report found that older boomers (born between 1946 and 1955) generally reacted more than younger boomers (born between 1956 and 1964) to market volatility by reducing their allocation to growth assets in a down-turn but returning to equities as markets recover.
CFSGAM said while they reduced their vulnerability to capital losses close to retirement, they may also lock in their losses and were likely to miss some of the gains in the recovery when their portfolio is less exposed to equities.
The report's author, CFSGAM analyst for economic and market research, Carlos Cacho, said: "As boomers get closer to retirement and realise they may not have sufficient savings for a comfortable retirement, they may look to increase their exposure to growth assets as a way of trying to make up this shortfall".
"This trend has likely been exacerbated by further declines in the cash rate and bond yields over recent years," he said.
Cacho said while the change in investor sentiment towards equities was milder than in previous periods of volatility, this could be a reflection of the already low allocations towards equities and other growth assets.
"When considering the level of investor sentiment towards equities compared to history, it may just be that they cannot decline much further without negatively impacting an investor's ability to accumulate superannuation," he said.
Recommended for you
Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equity firm.
An independent expert has ruled the Perpetual deal with KKR is no longer in the best interest of shareholders in light of the increased tax liabilities.
The Australian wealth management firm has named a custodian for its MLC and OnePath businesses following an extensive tender process.
Global real asset manager CapitaLand Investment has announced a key acquisition from Wingate as part of its growth strategy in Australia.
