Ageing population reflected in investment options
The years of continuing fallout and uncertainty following the global financial crisis are finally resolving into some clear patterns of investor behaviour, according to Principal Global Investors.
Such was the key finding of the annual Principal Global Investors CREATE Report, which details the findings of a worldwide survey of 713 asset managers, pension plans, pension consultants, fund distributors and fund administrators from 29 countries.
According to the Report, in an Australian context this behaviour is exhibited in a number of ways, but most recently in a move toward real assets as ageing demographics and a move globally by governments and corporates to get out of the ‘pension business.'
It said that such moves have pushed them to personalise risk by targeting specific investment outcomes to meet their needs.
Professor Amin Rajan, CEO of CREATE-Research and the author of the Report, said that the destructive impact of the debt crisis on investors' wealth had been well documented.
"What is less appreciated is the nature of powerful undercurrents created by the crisis when combined with ageing populations and persistent pension and retirement income deficits," he said. "Nor the lasting changes triggered by them."
Similarly, Grant Forster, CEO of Principal Global Investors (Australia), said that many of the CREATE report findings about changing investor behaviours were linked to these undercurrents.
"Personalising risk essentially entails transferring risk from those who couldn't manage it to those who don't understand it," he said.
"The superannuation and investment industry is responding to this shift by gravitating towards global solutions with a sharpened focus on downside risk such as lifecycle, absolute returns and inflation-plus style investments."
Indeed for Forster, the biggest single change with respect to asset allocation had been a shift towards real assets.
"We are seeing moves in commercial property both here and abroad, as well as in debt and equity," he said.
"At Principal Global Investors we have seen evidence of this demand reflected in an increased demand for our capabilities such as global property securities and direct US real estate.
"(And) as sovereign debt is no longer the ‘go-to' safe asset, there is increasing demand and interest in diversifying more broadly into various forms of credit," Forster continued.
"(This) means hiring managers who can take active decisions around sovereign/credit, long duration/short duration and public/private debt."
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