MySuper funds will look to lifecycle investment

As MySuper forces trustees to look at catering to the masses with their default fund, many will look to lifecycle investing to meet members’ needs.

Speaking at the Conference of Major Superannuation Funds (CMSF), Towers Watson Australia managing director Andrew Boal said he believed many funds would look to lifecycle investing for their default option, as not every member could be serviced by a one-size-fits all approach.

“Funds need to have an answer when it comes to lifecycle investing.

“I’m not that fussed about which solutions a fund chooses, but for MySuper, the fund has to have a default so that if the member doesn’t know what to do with their money when they reach a certain age then something happens automatically that they can then opt out of,” he said.

Michael Drew (pictured), managing director of QIC Lifecycle Strategies, said typical balanced ‘default’ funds did not take into consideration rolling time periods.

This meant the risk at certain ages and during a certain period in time (such as the global financial crisis) were not considered, making lifecycle investment an important factor for trustees to consider.  

However, one of the challenges to having a fund with a lifecycle investment focus as a MySuper fund could be the need for transparency, according to Boal.

“If you are moving between 80 per cent equities to 20 per cent equities then the cost is going to change and so you have to report those costs to members in a way they will understand,” he said.

Boal said that while lifecycle investing might not be for every fund, it was important for trustees to consider all options when it came to servicing the mass market.

“They won’t get advice, or very little, and this is the most important decision they will probably ever have to make. Helping them manage that for the mass market is the critical thing,” he said.