A superannuation industry consultant believes that in 2016, fund investment strategies will need to have a stronger focus on individual members with tailored asset allocations based on demographics.
As part of a wide-ranging paper that addresses Mercer's top 10 actions for superannuation providers in 2016, the consultant urges super funds to become more focused on outcome based investment strategies and be more proactive in reviewing their post-retirement offerings.
Mercer director of strategic research Hendrie Koster said many super investment strategies still assume all members have the same investment objectives "and therefore invest in the same way regardless of the members' specific needs; this approach will have to change in 2016."
"Investment strategies should be flexible and tailored to the specific needs of each member, including their balance, gender and objectives. Funds need to focus on more outcome based investing to ensure that their members achieve an adequate and sustainable level of income in retirement," Koster said.
He added action from the industry to provide retirees with a flexible income solution and an adequate and sustainable income for their retired life also remains a top priority.
"Post-retirement has certainly moved up the priority list for the industry as a whole, but the market is still immature and the range of solutions is thin. We hope to see a strong increase in the number of tailor-made post-retirement offerings that have so far been limited in the absence of clear government guidance," Koster said.
"Unfortunately market volatility is expected to continue throughout 2016, we've already experienced a particularly rocky start to year. Despite many sources of uncertainty in the economic and political environment, we see potential for interesting investment opportunities; there are few excuses for complacency. Low yields and heightened volatility make risk management more important than ever,"
Mercer's Top 10 themes for super providers in 2016:
- Focus on outcome based investing
- Prepare for potential changes to super tax
- Post-retirement continues to be a focus
- Re-define objectives in a volatile world
- A time to tilt portfolios to alpha
- Reflect on governance and beliefs
- Board evolution: Structure and diversity
- Build a sustainable strategy for the future
- Technology changing the face of consulting
- Reduce operational and implementation inefficiencies