At Milliman we believe managing risk is a critical component of delivering better retirement outcomes. As we started to look at the investment philosophy for retirees and pre retirees, we leveraged the work we did with large scale institutions for over 20 years, and as we began to focus on the types of solutions for that market we really focused on a number of core principles:
The first that risk management must be a low cost exercise. There are no free lunches in the market when it comes to risk and return, so what we attempt to do is find cost effective ways of providing protection when markets are correcting without sacrificing large amounts of upside and we do that through the types of instruments which we use to trade risk which includes futures and other exchange traded instruments.
Secondly one of our core philosophies and principles for a risk management perspective is that risk management must be a predictable outcome so when we approach risk management as an organisation we really focus on rules based approaches, we don't have traders and portfolio managers that are trying to tie markets and understand or anticipate market corrections. and to do that we focus on a number of signals and rules based systems that look at things like volatility and also the direction that markets are moving in to try and put on increasing amounts of protection when markets are falling or when they become more volatile.
The third principle that we really strongly believe in is that creating a successful investment journey really needs to adapt and appreciate the behavioural dynamics that investors face, so when it comes to things like loss aversion where investors feel much more pain from losses than they do satisfaction from gains from similar amounts, we believe protection has a large role to play in helping investors remain invested through times of volatility.
That’s why one of the reasons in working with Colonial First State we now offer the Milliman managed risk investment solutions to financial planners and their clients.
We have also spent time with a new product solution called Even Keel where we have taken the same risk principles in the managed funds and we now deliver that as a pure overlay solution for advisers to use in their existing model portfolios, giving them the flexibility to turn the risk management on or off as they require for their clients.
At Milliman our mission is to protect the financial wellbeing of people everywhere as a result focusing on retirees is in our DNA and that is why we have focused our retail efforts squarely on the retirement market.