Eastspring Investments (“Eastspring”), the US$131 billion Asian investment management arm of Prudential plc, and one of Asia’s largest investment managers, told financial intermediaries at the “Surfing the Investment Wave to Retirement” seminar on retirement savings options, that many of the investment rules have changed and investors need to adapt to maximise their returns.
The best approach, according to the seminar speakers, is a multi-asset portfolio invested over the long-term, which potentially offers lower volatility when compared to equity, higher returns when compared with either equity or bonds, and represents a reasonable “long-term partnership” opportunity.
“It is a ‘get paid while you wait’ strategy that will appeal to investors who prefer lower risk exposure to volatile markets while receiving a regular distribution,” said Ms Joanna Ong, Portfolio Manager, Global Asset Allocation, Eastspring Investments.
Mr David Gerald, President and CEO of Securities Investors Association (Singapore) expressed his views on investors’ expectations for retirement, noting, “With the quadruple storm of slower economic growth in most of the world, equity market volatility, equity dividends under threat and low bond yields, investors are facing difficult choices about where to put their money.”
"While income streams can be found, they are more likely to be from equity dividends and higher yielding bonds, however both carry higher risk premia,” said Mr Robert Rountree, Global Strategist, Eastspring Investments. “To build a nest egg today, the "return verses risk" balance is an active consideration, much more so than ever before."
In terms of the fixed income component of the multi-asset portfolio which would typically be 60% equities and 40% bonds, Mr Boon Peng Ooi, Chief Investment Officer, Fixed Income at Eastspring Investments, urged investors to consider Asian US$ bonds, which he said offer superior return-to-risk attributes.
“As an asset class, Asian US$ bonds in particular have shown steady appreciation over the last 15 years, with a return of 203%* and without the volatility of the equities market,” he said.
Mr William Barbour, Client Portfolio Manager, Equity, observed that dividends have been the key driver of total equity returns from the beginning of 2000 through to the end of January 2016, but trailing price to book valuations in Asia also signal great value opportunities.
“In Asia Pacific (ex-Japan) alone, 75.7% out of the 119% total return came from dividends over the last 15 years**,” Mr Barbour said.
At the seminar, Eastspring Investments presented two sample multi-asset portfolios with different asset constitutions aimed respectively at targeting income (US and EM bonds and high dividend yield/low volatility equities) and growth (equities, high yield, EM and US investment grade bonds, alternative assets).
In the annual Eastspring Investments Investor Behaviour Survey*** conducted in Singapore in 2015, it was found that although more effort to invest for retirement was made year on year, more than half of investors aged between 45 and 55 were only now ‘actively preparing’ for retirement, despite being close to the average retirement age.
* Source: Bloomberg from 31 December 2000 – 31 January 2016
** Source: CLSA Data from MSCI Indiices 31 December 1999 – January 2016
*** The Eastspring Investments Mutual Fund Investor Behaviour Study is an annual survey designed to track current asset allocation and the investment attitudes of mutual fund investors, understand the key drivers of decision-making, measure market confidence and evaluate investment intentions for the next six months. The study was conducted in July 2015 and involved online interviews with 1800 investors in Hong Kong, Singapore, Malaysia, Taiwan and Indonesia.