Diversification key in post-retirement, manager says
Diversification should be of paramount importance for those investors in the post-retirement phase, alongside narrowing the range of possible investment outcomes, according to Adam Kibble, a product specialist at Insight Investment.
Discussing the manager’s flagship Broad Opportunities strategy, Kibble said the objective of the fund was to narrow the range of possible outcomes over a five-year time horizon.
And while this didn’t mean narrowing the strategy down into something effectively like a term deposit, it did mean having a smoother path of returns and having greater certainty around the range of outcomes that were possible over a period of time.
“The easiest and best way of doing that is to apply diversification. So, we want to have access to as many different types of assets as possible and return streams as possible that occur at different times in the cycle, so that we can diversify our exposure to different types of returns,” Kibble said.
Kibble said the danger with a lot of separately managed accounts is that they were highly concentrated in areas such as property or Australian equities, and then within that they might also be highly concentrated in certain stocks.
“That may have given you a great run of returns, say, in property recently, but you’ve got a very wide range of outcomes you could possibly have – negative outcomes and positive outcomes,” he said.
“So, we’re trying to let people know that diversification is the simplest way of narrowing that range of outcomes. You might get rid of the tops and the bottom tail of the return distribution but you’re getting more certainty around your outcome. Diversification is the most important thing.”
According to Kibble, having a dynamic asset allocation approach, or weighting assets to the right time in the cycle, was the second-most important thing to be cognisant of.
And by combining these two principles, Kibble said his fund was able to create a smoother path of returns and generate its inflation plus 5 per cent objective over time, with less volatility.
“And that’s really important for the post-retirement period in particular, where you want to have a narrower range of uncertainty and get people out of term deposits and these very low-yielding instruments, because they can still take some risk and broaden out their return possibilities, and they can do it with a better outcome overall.”
Recommended for you
Clime Investment Management has faced shareholder backlash around “unsatisfactory” financial results and is enacting cost reductions to return the business to profitability by Q1 2025.
Amid a growing appetite for alternatives, investment executives have shared questions advisers should consider when selecting a private markets product compared to their listed counterparts.
Chief executive Maria Lykouras is set to exit JBWere as the bank confirms it is “evolving” its operations for high-net-worth clients.
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
