COVID-19 is causing asset fund managers to construct new models of risk, particularly for those nearing retirement, according to panelists speaking at the Investment Funds Institute of Canada (IFIC) virtual conference this week.
Neal Kerr, head, Scotia Global Asset Management (Canada), said the pandemic has changed the entire concept of risk and now needs to be redefined.
Trillions of dollars in assets are currently sitting in model portfolios with mixes of 60 per cent equities and 40 per cent fixed income, but that may not be enough to keep people’s retirement goals on track, he said.
“Equities are higher risk but if I can purchase a blue-chip 4% dividend-paying company at a 50% dividend payout ratio that maybe less risky than buying a Government of Canada bond at 0.6 per cent yield,” said Kerr.
Kathleen Bock, head of Vanguard Americas and managing director, Vanguard Canada, said she hoped the investor mindset has people thinking long-term because the market has shown over and over again that timing the market is not the way to go.
Bock said she’s trying to put herself into the shoes of the average investor, many whose financial security has been jeopardized by the pandemic. “We really have to think about what the best ways are to help the investing public.”
Many people have been traumatized having gone through both the international financial crisis in 2008 and now COVID-19, said Bernard Letendre, head of Wealth and Asset Management, Canada Manulife Investment Management.
“It has implications for our industry,” said Letendre. “One is that people who have money coming into the pandemic will probably have more, and people that were not doing great will probably feel worse. I can imagine an increase in focus on high net worth.”
It also means work has to be done on the product development side as interest rates remain low and high inflation stands as a possibility.
“They are going to be quite sensitive to those black swan events that are supposed to happen once in a lifetime but have now happened twice in just over a decade,” he said. “What does it mean for retirement as a huge cohort moves into deaccumulation?”
As the number of seniors in Canada continues to rise, there will be a need for alternative asset classes, ones that had not been previously available to investors, predicted Damon Murchison, executive vice president, head of Retail Mackenzie Investments.
Murchison said he believes that the way people invest – whether online, robo-advice or traditional advisors – will prosper, especially among older Canadians.
When it comes to a return to work, the panelists said none of them are in a hurry to head back to their traditional workplaces.
In the meantime, Murchison said the next year will be mentally difficult for all concerned.
“This year is going to be extremely tough. It’s going to be tough for us, it’s going to be tough for our people, it’s going to be tough for all clients. And we all have to admit that and ensure that we do everything to stay healthy in mind and support each other.”
