Balancing risk and reward: investment opportunities for Lifestage Funds

5 min read

Find out how Martyn Wild and his investment team actively look for opportunities in both global and domestic markets for the Lifestage funds, so that investors can have a really comfortable retirement.

As Chief Investment Officer of BT Financial Group, Martyn Wild and his team's job is to decide where to invest money in the Lifestage Funds that sit within BT Super for Life. Lifestage Funds are well-diversified investments managed according to age. Over time, the investment mix shifts from growth to more conservative investment options as you get older.

His decisions are influenced by what's happening around the world. Farrell is using big-picture analysis to prepare for possible risks that could send markets tumbling, but to also find opportunities.

And despite global challenges like Greece, China, our own economy, and the US, Wild is still seeing opportunities for Lifestage Fund investors, in the likes of International Shares and local Fixed Interest investments. "I think there's still a lot to be optimistic about," he says.

A simple goal

Wild and his team have a simple goal: "To create a pool of money for Lifestage Fund investors at retirement so they can have a really comfortable retirement".

"In order to get to that goal, you have got to take risks in your portfolio, but in a way that's going to be rewarded," he says.

Basically, Wild wants to protect members' money, but also ensure they get a good return.

The Lifestage Funds manage investments according to your stage of life, and the investment mix adjusts over the course of your life, with more aggressive growth objectives while you are younger coupled with a more conservative or risk adverse approach the closer you approach retirement age.

Wild and his team need to decide how much is invested in various asset classes like Australian shares, international shares, listed property, bonds, and even hedge funds.

What's the big picture telling us?

A major driver of Wild's investment decisions is the big-picture or 'macro' environment. "We spend a lot of that time assessing these macro risks," he says. "We need to be really cognisant of some of the things that can really derail markets."

Wild has more than 20 years of market experience, but he describes current conditions as challenging and unique. "We will have lower returns going forward," he says. That means investors can expect high single-digit returns from equities and around 3 to 4 per cent from fixed interest.

Central banks stimulus has seen the prices of things like shares and bonds rise to overvalued levels. And Wild is monitoring a number of macro risks that could hurt investors.

Some investors, for example, are fretting that if the US Federal Reserve (the Fed) hikes rates too quickly, markets could fall sharply. But Wild says he doesn't expect that to happen. "We believe when the Fed begins raising rates it will be very gradual," he says.

Investors have also been worried about the ever changing situation in Greece. But Wild has been monitoring the Greek situation for years now, and he has successfully positioned the portfolio to manage that risk, among others.

Opportunities in international shares

But there are also opportunities.

Under the big picture or 'macro' umbrella, Wild also eyes specific asset classes that could outperform.

"We're trying to find opportunities out there that can really benefit the portfolio," he says.

One area he's allocating a carefully measured proportion of Lifestage money in growth allocations is unhedged international shares.

Wild says there are opportunities in beaten-down European shares. But he also wants members to benefit from economic recovery in the likes of the US, and to win from any falls in the $A.

Positive on Australian fixed interest

Wild also likes Australian fixed interest. 'Fixed interest' are securities like corporate and government bonds and make up the defensive part of an investment portfolio.

"Australian fixed interest, given it currently offers higher yield returns than many parts of the markets, will benefit from the prospect of interest rate cuts," Wild says.

As interest rates and yields fall, the value of bonds rises.

Wild expects the RBA to cut rates below 2 per cent to assist industry in its rebalancing away from mining investment and to stimulate investment growth. Those rate cuts will boost Australian fixed interest.

Remaining flexible

Wild says in this complex environment he wants to remain flexible, to both avoid risks and to take opportunities.

"It's about being flexible and having the right tools in your portfolio," he says.

But it's the goal of delivering members a comfortable retirement that ultimately determines where he invests.

"Everyone in our team really does understand what we're trying to do for our members," he adds. "We always have the investor and member in mind. At the end of the day that's what determines how much risk we take and why we're taking it in the first place."

Find out more about BT Super for Life unit prices and performance figures online.

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This information is current as at 30/06/2015.

BT Funds Management Limited ABN 63 002 916 458, AFSL No. 233724, RSE No. L0001090 is the trustee and issuer of interests in BT Super for Life which is a part of Retirement Wrap ABN 39 827 542 991, RSE R1001327. A Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for BT Super for Life can be obtained by calling 1300 653 553, or visiting You should obtain and consider the PDS and other relevant disclosure documents before deciding whether to acquire, continue to hold or dispose of units in BT Super for Life. This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs.

The information provided is factual only and does not constitute financial product advice.  Before acting on it, you should seek independent financial and tax advice about its appropriateness to your objectives, financial situation and needs.

Projections given in this information are predicative in character. Whilst every effort has been taken to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The results ultimately achieved may differ materially from these projections.

© 2015 BT Financial Group.