Drawdown investment strategies are still closely aligned with those for non-drawdown clients, new research shows, despite their differing needs.
Research from Aegon finds that the largest investment flows for both drawdown and non-drawdown clients over the last year were into multi-asset strategies, accounting for 45 and 46 per cent respectively.
Equity growth and bonds came in second and third place for both types of clients. Equity income was ranked fourth for drawdown clients, with 12 per cent of flows, compared to 8 per cent for non-drawdown investors.
The difference in the popularity of bonds was just three per cent between the two different types of investors.
The similarity in investment strategies persists despite a three-fold increase in the number of retirees that have opted for drawdown since the pension freedoms, and that drawdown investors have “different demands on their money and generally shorter investment time frames,” Aegon says.
Aegon investment director Nick Dixon says: “Drawdown’s popularity has rocketed since the pension freedoms, but retirees’ investment choices are still adjusting to the needs of those that choose to remain wedded to the markets in retirement. Drawdown investors are largely favouring tried and tested brands and investment strategies over newer, more tailored options.
“As a result, there is a mis-match between the long-term growth objectives of many of the strategies being used, and the near-term income needs of retirees who use them. Retirees are also now more exposed to market highs and lows than they have ever been.
“While most drawdown investors have benefited in the largely buoyant markets witnessed since the new rules came into force, the strategies used haven’t yet been tested by a Dotcom or credit crunch style market shock. Our hope is that the market evolves further before one occurs.”