Dynamic Lifecycle Strategies for Target Date Retirement Funds

Basu, Anup K.; Byrne, Alistair; Drew, Michael E.

doi:10.2139/ssrn.1302586

Cited by 21 publications

(29 citation statements)

References 15 publications

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“…A more dynamic lifecycle strategy is suggested with regular changes in the asset allocation based on the actual accumulation in the retirement fund resulting from portfolio performance relative to the target amount at retirement. Simulation shows higher potential terminal balances with this strategy compared to mechanistic lifecycle investing (Basu, Byrne & Drew 2011).…”

Section: Multi-period Modelsmentioning

confidence: 91%

Asset Allocation: Analysis of Theory and Practice in the Australian Investment Management Industry

Santacruz

2014

SSRN Journal

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Section: Multi-period Modelsmentioning

confidence: 91%

Asset Allocation: Analysis of Theory and Practice in the Australian Investment Management Industry

Santacruz

2014

SSRN Journal

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“…This also might lead to the emergence of a proliferation of cohorts with differing experiences and expectations over time—not to mention the concerns raised previously by Basu et al. (). Also, profit generated from superannuation funds can be varied based on fund managers' performance and the amount contributed by members via their employers and/or voluntary contribution.…”

Section: The Mysuper Initiativementioning

confidence: 99%

“…Basu et al. () assert that a conventional lifecycle strategy may prevent members from achieving greater returns when their investment portfolios grow larger. The lifecycle strategy may also undermine members' wealth accumulation objectives, particularly if they are switched into conservative assets before they can accumulate adequate retirement savings.…”

Section: The Mysuper Initiativementioning

confidence: 99%

“…To overcome this issue, Basu et al. () propose a dynamic lifecycle strategy that places strong emphasis on satisfying members' retirement targets. Unlike conventional lifecycle strategies, the dynamic lifecycle strategy enables fund managers to move assets in both directions, from high growth to conservative assets and vice versa.…”

Section: The Mysuper Initiativementioning

confidence: 99%

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Retirement policy: a review of the role, characteristics, and contribution of the Australian superannuation system

2015

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With a market capitalisation of over $1.84 trillion dollars and large annual flows, the Superannuation Guarantee has been regarded as the backbone of Australia's retirement policy scheme and a primary driver of economic growth. However, losses encountered in the aftermath of the global financial crisis led to a major review of superannuation, mainly in response to the lack of accountability, comparability, and transparency discovered within ‘default’ investment options. An outcome of this review was the MySuper initiative, which imposes obligations on fund providers to reconfigure their default investment strategies in accordance with new regulatory requirements. Despite these policy reforms, other challenges remain, such as gender inequality, excessive superannuation fees, low financial literacy, and lack of member participation in growing retirement savings. The paper provides a review of literature pertaining to the background, significant policy changes, and ongoing development of the Australian superannuation system. We emphasise the role of superannuation in the economy; characteristics of the industry, plans, and funds on offer; recent policy initiatives; and perceived inadequacies of the system. The paper concludes with possibilities for further empirical research.

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“…Some authors do not formally specify the investor's problem and simply propose an investment strategy. Basu et al (2011) look at performance relative to a target return and suggest a contrarian strategy of switching the investor's asset allocation between 100% of wealth invested in stocks, and 80% of wealth in stocks and the remainder in bonds according to whether the cumulative target return is attained or not. Similar strategies are compared in Basu and Drew (2009).…”

Section: Introductionmentioning

confidence: 99%

Less is more: Increasing retirement gains by using an upside terminal wealth constraint

Donnelly

Gerrard

Guillén

et al. 2015

Insurance: Mathematics and Economics

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We solve a portfolio selection problem of an investor with a deterministic savings plan who aims to have a target wealth value at retirement. The investor is an expected power utility-maximizer. The target wealth value is the maximum wealth that the investor can have at retirement.By constraining the investor to have no more than the target wealth at retirement, we find that the lower quantiles of the terminal wealth distribution increase, so the risk of poor financial outcomes is reduced. The drawback of the optimal strategy is that the possibility of gains above the target wealth are eliminated.

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Dynamic Lifecycle Strategies for Target Date Retirement Funds

Cited by 21 publications

References 15 publications

Asset Allocation: Analysis of Theory and Practice in the Australian Investment Management Industry

Asset Allocation: Analysis of Theory and Practice in the Australian Investment Management Industry

Retirement policy: a review of the role, characteristics, and contribution of the Australian superannuation system

Less is more: Increasing retirement gains by using an upside terminal wealth constraint

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