Super portfolio mix putting investors at risk

Australian superannuation portfolios have been identified as an "aggressive constant mix", leaving investors in the pre- and post-retirement stages at risk, research revealed.

The Centre for International Finance and Regulation (CIFR) funded a study into the ‘retirement risk zone', which said 70-90 per cent of assets are allocated to growth assets.

This remained the case even during the 2008 global financial crisis, when retirees got stung in the downturn, authors of the study Professor Geoffrey Kingston and Professor Lance Fisher, both from Macquarie University, said.

"Current strategies leave retirees particularly exposed due to high allocations to growth assets," lead author Kingston said.

"If the share of growth assets is progressively scaled back to about half, the risk experienced around retirement can be managed."

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The study compared trends in the United States, and said Australia is lagging when it comes to best practice.

The authors of the study are urging the industry, the Australian Securities and Investments Commission, the Australian Prudential Regulation authority and individual households to move away from constant-mix asset allocations.

Kingston recommended a different asset allocation strategy be brought in for retirement funds, where exposure to risky assets declines as investors inch closer to retirement age, and rises again after retirement.

Seven out of 10 households in Australia depend mostly on their pension for an income in retirement, while nine out of 10 draw some pension during retirement.

"By ensuring superannuation assets are less risky around the point of retirement, we can positively impact Australia's pension liabilities," Kingston said.