Rethinking post-retirement asset allocation

Merlon Capital Partners

While growth assets are widely accepted in asset allocation decisions during the accumulation phase, many investors overlook the benefit allocating to shares can provide in the way of growing tax-effective income in the post-retirement phase. This paper discusses the differences between pre-and post-retirement asset allocation and how investors can use an equity income strategy to improve income and returns with less risk. Utilising a simple hedging strategy over the retirement equities allocation can improve the length of time the equities allocation can support a given amount of inflation adjusted retirement spending by over 34% where the sequence of market returns are poor. This hedging strategy allows investors to safely increase their allocation to equities in a retirement context. When this is combined with non-index aware investment process that seeks out companies with high sustainable free cash flow, retirees stand to benefit from higher and faster growing income with lower risk.

Merlon Capital Partners

Merlon Capital Partners is an Australian-based boutique fund manager specialising in equity income strategies. Merlon commenced operation in May 2010, with the objective of providing high quality, tailored investment management services to investors.


retirement income sequencing risk longevity risk


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