Financial planners will need to convince clients to allocate money to growth assets this year, including domestic and global equities, after the downturn in equity markets disturbed the balance in their portfolios.
"Growth assets normally should be around 60 per cent of a client's portfolio, [but] they are now at 40 per cent," Australian Unity Investments general manager retail Adam Coughlan told InvestorDaily.
"Financial advisers over the course of this year will look to get that back to normal levels - at least that is the conversation we have with advisers," Coughlan said.
Asset allocation will be the dominant theme for the planning industry this year, but as investors are reluctant to get back into the market the main question is how to do this defensively.
One way to do this is by investing in equity funds which mitigate risk through option strategies, or "lower betas" as Coughlan calls these funds. In short it means the fund will grow less than the market in boom times, but also drops less in value in bear markets.
"We expect these types of funds to come into vogue," he said.
He also expects portfolio construction to fall back on traditional ways of fund allocation, in which fixed income is a defensive holding and direct property is held as a hedge against inflation rather than attaching growth expectations to these types of holdings.
"[Property] is somewhat unloved right now, because people have been allocating it as a pure growth asset," Coughlan said. "But if you have a good property manager you structure leases against CPI (consumer price index) increases."
Planners will actively drive the reallocation of assets, because they rely for a large part on investments in growth assets in the generation of revenues.
