Fundies should look to pre-retirement solutions post GFC, says JP Morgan

JP Morgan has asserted that the super industry needs to look at alternative styles of investment that are more closely tailored to the needs of those nearing retirement.

This might include capital protected products that enable older investors to take advantage of high growth investments, said JP Morgan's executive director of equity derivatives and structured products, David Jones-Prichard.

He said during the global financial crisis many investors close to retirement found themselves in ‘one size fits all’ default asset allocations comprising around 70 per cent growth assets.

“This meant that they were hit hard by the downturn when they could least endure it,” he said.

Prichard said while younger members generally benefit from more aggressive growth over time, conventionally older investors are moved into lower risk asset allocations.

“Typically, investors approaching retirement are advised to de-risk their asset allocation and in so doing sacrifice growth for security,” said Jones-Prichard. “When you consider that for many it’s their last major opportunity to build the size of their portfolio, you can see they have a paucity of choice — it’s either unacceptable risk or very low returns.”

Jones-Prichard said the Cooper Review is an opportunity for fund managers to look for ways of addressing this issue.

“The fact is, there are forms of investment now available that have high growth potential while placing a floor on losses. It’s now up to the fund managers to be receptive to calls for more flexible products and take a good look at what’s available.”