Retail investors are increasingly rejecting traditional investment models, instead turning to more dynamic and tailored products, including goals-based investing and lifestage funds.
“The failure of existing models to meet investor expectations has already seen a significant push to self managed superannuation funds and do-it-yourself investing,” Lonsec Research Senior Analyst Deanne Baker says.
“Many investors have felt let down by static and unresponsive products on offer,’’ Ms Baker says.
Much of the dissatisfaction stems from competing performance measurements, according to the latest Multi-
Asset Sector Review by the research and ratings company.
“Retail investors often judge an investment’s performance against personal objectives, how they will meet living expenses, long term aspirations, family needs or travel goals. Fund managers, however, measure in terms of ‘benchmark relative’ or ‘alpha’ or ‘peer relative’ performance. There needs to be a more tangible link between fund objectives and investor outcomes,” Ms Baker says
Fund managers are responding, however, and beginning to offer new products never seen before in the retail space.
“We are starting to see solution-based investments replacing the traditional off the shelf and one-size-fits-all models,” Ms Baker says.
“Previously, these products were the exclusive domain of institutional investors but now they are being specifically packaged and tailored for individual investors, particularly in the multi-asset sector.
“Product design is no longer being driven by fund managers in an ‘if you build it they will come’ fashion. Instead, investor needs and goals are now at the heart of the product development process,’’ she says.
According to Lonsec’s latest review, multi-asset managers are leading the charge in goals based investing with multi-asset real return strategies, in particular, having enormous success as inflows surged from $327 million to $14.4 billion during the past two years to June 2014.
Source: Lonsec
