Plato works with Milliman on risk

Boutique Australian equities manager Plato Investment Management has announced it is working with Milliman to overcome the problems of sequencing and longevity risk by developing risk management strategies aimed at enabling investors to maintain higher weightings in growth assets whilst providing tail risk management in times of financial crises. 

The company said the global financial crisis had served to highlight the limitations of traditional balanced funds and, as a result, many superannuation funds were developing “lifecycle” strategies which progressively de-risked investments as members approached retirement. 

However Plato founder and managing director Don Hamson claimed that for many superannuants, reducing sequencing risk in this way simply increased longevity risk. Investment projections showed that fund members and investors could not afford to accept the lower returns associated with less risky portfolios.  

“The issues that impact retirees and how they should invest are substantially different from those of investors focused on the accumulation of wealth,” he said. “Our focus on after-tax investment approaches was the first step in acknowledging these issues. 

“Over the last couple of years we have focused our research efforts on the impact that sequencing risk can have on retiree portfolios and potential solutions to this problem. This has been in direct response to our clients who have been disappointed with the poor returns offered by cash and fixed income, but who are still haunted by the GFC when it comes to investing in equity markets,” he said. 

Hamson said that through his company’s work with Milliman, it was intended to provide clients with access to an institutional-quality risk management platform and approach. 

Milliman practice leader Wade Matterson said the company would effectively be delivering his Managed Risk Strategy (MRS) as an overlay to Plato’s existing fund. 

“By delivering the MRS as an overlay to Plato’s existing fund, advisers and their clients will gain access to a best of breed risk management methodology applied to Plato’s proven equity investment approach,” he said.