National Australia Bank Wealth’s three new inflation-plus strategies have been seeded internally by the group’s MLC Horizons series of diversified funds.
NAB Wealth and MLC unveiled their new actively managed Inflation Plus funds this week, which aim to deliver returns above inflation over three, five and seven years by investing in a broad range of assets including alternatives, property securities, equities, bonds and cash.
MLC Inflation Plus Conservative, Moderate and Assertive funds are now available on NAB Wealth’s administration platform, MLC Wrap. Investors in the MLC Horizons series, which ranges from the ultra-conservative Horizon 1 up to the high-risk Horizon 7, also have exposure to the new strategies.
Head of investments at MLC, Susan Gosling, warned investors not to rely on traditional diversified funds or equity markets to deliver the returns they needed for a comfortable retirement.
“The global financial crisis proved that traditional diversified funds, with their statistic asset allocation mix, are vulnerable to sharp market downturns,” she said.
“Consider also Australia’s ageing demographics and that people in or nearing retirement have a much-reduced tolerance for negative returns. So a loss in their portfolio when they’re in draw-down phase effectively means that if they take money out after a market decline, they’re locking in losses.”
The new funds had a sharper focus on risk management, with the flexibility to regularly change asset allocation on an opportunistic basis.
Gosling rejected that the Inflation Plus funds were me-too products, pointing out that MLC had successfully run its Long Term Absolute Return (LTAR) fund since 2005. LTAR, which has been renamed MLC Inflation Plus Assertive, originally had an investment time horizon of 20 years. That was reduced to 10 years and then on October 1 cut to seven years.
“Our ability to manage these types of portfolios has been tested,” she said.
“We progressively shortened the time horizon of LTAR and believe seven years is easier for investors to get their heads around. Retirees have multiple time frames. For example, they need to invest for the longer term, but also have a portfolio which generates cash-like returns with no risk for them to draw an income for the next one to two years.”
Gosling said the new funds were suitable for both retail and institutional clients, and particularly for retirees who had, until recently, been starved of post-retirement investment options.
