Managing volatility and drawdown are the keys to meeting long-term goals, according to Milliman.
Further on that, for investors in or near retirement and beginning to replace their salary with their life savings and investment returns, the market events created significant changes to their quality and therefore managing these factors was crucial to maximising real-world goals.
According to SuperRatings, the median superannuation balanced option fell 18.5 per cent, while the median growth option experienced a drawdown of 23.2 per cent while average net annual return delivered by most large super funds over the 20 years to 2016 was 5.7 per cent, a figure which hid the impact of major drawdowns and volatility.
However, Milliman said that there were ways to provide more predictable explicit portfolio protection to growth assets aimed at capturing more upside performance while reducing exposure in negative market periods and to create more compounding potential for investors seeking to build capital over the long run and help retirees manage the need for income and growth.
This would include a rules-based risk management strategy, which were originally developed for some of the largest global insurance companies and pension funds, which were offered by Milliman to retail and superannuation investors through various formats and partners.
They aims to enable more exposure to growth assets while providing account value protection.
“In this way, investors could derive greater benefit from the power of compounding returns and shape a more confident retirement journey”, Milliman said.