Advisers should ramp up defensive equity

Financial advisers have been told they may need to dial up their defensive equity strategies for retiree clients to defend their income.

Vertium Asset Management has told advisers that the unusually quick recovery from the December equity dip was unsustainable and could result in a protected recovery with possibly even another downward correction.

The equity income manager found that over the last seven sharemarket corrections, the average decline was 19 per cent with a recovery time of 1.4 years.

However, the one in December 2018 recorded a decline of only 11 per cent and a speedy recovery time of five months, which could result in the protracted recovery.


Vertium chief investment officer Jason Teh said that advisers needed to shield retirement portfolios from market corrections by lowering sensitivity to movements.

“An efficient way to achieve this is to allocate more to funds with low correlation to the market, so if the market declines, that portfolio is not fully tethered to the decline in capital values,” Mr Teh said.

Vertium is a Copia investment partner and its general manager of distribution, John Clothier, said financial adviser clients were becoming increasingly concerned about their retirement clients.

“Our financial adviser clients are increasingly expressing concerns about of a lack of attractive income options for retirees, as well as the likelihood of a pull-back in equity markets,” he said.

A solution was in a low risk income fund that had low sensitivity and lower volatility risk than that of the S&P/ASX 300 Index, of which there are options available.

Advisers should ramp up defensive equity
Defense equity
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Eliot Hastie

Eliot Hastie

Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms. 

Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.

Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).

You can email him on: [email protected]

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