The 60/40 benchmark portfolio is 35 years old. Its prominence culminates with the longest decrease in interest rates. How do investors need to reframe the way that they look at portfolios today? What characteristics are critical for investors as they redefine their return objective, implementation options, and ultimately map risk to member outcomes?

Speakers:

Kim Bowater, Director of consulting, Frontier

Mark Burgess, Chair, investment committee, HESTA

Michael Drew, Chief investment officer, MGD Private

Keri Pratt, Head of strategic partnerships, NSW State Super

Moderator: Gerard Parlevliet, Chair — investment committee, Prime Super

Key Takeaways

  • The trend away from traditional profiles in portfolio construction like the benchmark 60/40 asset mix may have accelerated due to the events of 2020 according to State Super’s Kerrie Pratt, but the development is hardly a surprise.
  • The government-regulated fund’s head of strategic partnerships says the 60/40 benchmark “isn’t something super funds have focussed on for a number of years”, especially in Australia.
  • Attributing the trend to the pandemic or a low-rate environment alone would be simplistic and ultimately reductive, she believes. Australia’s institutional fiduciaries and trustees have been developing and implementing alternative solutions since long before these developments occurred.
  • The stress of Covid19 has underscored the need for fiduciary investors to not only manage their directional governance, but to beef up their relational governance as well, particularly as ‘early access’ schemes have damaged personal balance sheets, according to Michael Drew (pictured), managing partner at MGD Private.
  • While Drew concedes most funds have advanced governance processes, the stress of the pandemic combined with shifting prudential standards around liquidity and liquidity cascades mean fiduciary investors are forced to have difficult conversations with clients around how best to stay the course.
  • On top of the difficult market conditions, the Australian government’s ‘early access’ scheme has seen $33 billion to $35 billion worth of superannuation withdrawn as citizens grapple with widespread job losses and economic closure.
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