Baby boomers missing out on recovery gains
Baby boomers are likely to miss some of the gains in market recovery as volatility drives them to reduce their equity portfolio in a down-turn, according to a report.
Colonial First State Global Asset Management's (CFSGAM) "Investor Insights" report found that older boomers (born between 1946 and 1955) generally reacted more than younger boomers (born between 1956 and 1964) to market volatility by reducing their allocation to growth assets in a down-turn but returning to equities as markets recover.
CFSGAM said while they reduced their vulnerability to capital losses close to retirement, they may also lock in their losses and were likely to miss some of the gains in the recovery when their portfolio is less exposed to equities.
The report's author, CFSGAM analyst for economic and market research, Carlos Cacho, said: "As boomers get closer to retirement and realise they may not have sufficient savings for a comfortable retirement, they may look to increase their exposure to growth assets as a way of trying to make up this shortfall".
"This trend has likely been exacerbated by further declines in the cash rate and bond yields over recent years," he said.
Cacho said while the change in investor sentiment towards equities was milder than in previous periods of volatility, this could be a reflection of the already low allocations towards equities and other growth assets.
"When considering the level of investor sentiment towards equities compared to history, it may just be that they cannot decline much further without negatively impacting an investor's ability to accumulate superannuation," he said.
Recommended for you
In the latest Meet the Manager profile, Money Management speaks with Michael Skinner, founder and managing director at Blackwattle Investment Partners.
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
