EDHEC-Risk Institute study shows room to improve investment solutions in the Australian super system

Written on 24 July 2014.

The study from EDHEC-Risk Institute sponsored by the AXA Investment Managers’ Research Chair on Regulation and Institutional Investment entitled, “Superannuation v2.0: Towards the Next Generation of Pension Funds in Australia”, examines recent developments in and opportunities for improvement of the defined contribution (DC) superannuation system in Australia, in light of recent regulatory efforts to further develop the framework for default options.

The paper suggests improvements which could be implemented within existing DC super funds and argues for the design of a second generation of DC funds to achieve clear objectives at relevant horizons, using state-of-the-art risk management to deliver these outcomes with the highest probability.

It also proposes a reporting and certification scheme of retirement solutions that would allow solution providers to signal to fund members which long-term investment solutions best match individual fund members’ post-retirement income needs, thereby assisting fund members to assess the relevance and suitability of retirement solutions in relation to their retirement goals such as, targeted retirement age and targeted retirement income.

“Increasing longevity is making the distinction between pre- and post-retirement obsolete, says co-author Frédéric Blanc-Brude, Research Director at EDHEC-Risk Institute—Asia. We now know how to design good mass-customised investment solutions that combine the benefits of efficient risk diversification, risk hedging and risk insurance over the entire lifecycle of individuals, and that can significantly improve their long-term wealth outcomes.”

Elodie Laugel, Deputy Head of Institutional Client Group at AXA IM said: “AXA IM is committed to understanding and addressing the retirement risks facing our clients globally and our partnership with EDHEC-Risk Institute has contributed greatly to our knowledge in this area.  Australia is a highly developed and dynamic market, already steps ahead of many other regions in terms of retirement solutions.  The experience of the Australian market provides insight into how we as asset managers can help current and future retirees identify solutions which will best meet their individual needs in retirement.”

A copy of “Superannuation 2.0: Towards the Next Generation of Pension Funds in Australia” can be downloaded via the following link:

EDHEC Risk Publication Superannuation v2.0: Towards the Next Generation of Pension Funds in Australia

This research was supported by AXA Investment Managers as part of the “Regulation and Institutional Investment” research chair at EDHEC-Risk Institute and is the fifth research report in a series sponsored by AXA IM looking at retirement and pension solutions globally, previous reports can be accessed here.

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