Key points
- Bonds and equities are said to be more correlated, weakening traditional 60/40 diversification
- Sequencing risk is viewed as critical for retirees and pre-retirees
- Contractual lifetime income streams and annuities are promoted as defensive income tools
- AGILE provides downside protection with market-linked upside
Australian retirees urged to rethink bonds as defensive anchor, Justine Marquet from Allianz Retire+ states that traditional bond allocations no longer provide the same defensive protection for retirees. Marquet notes a rising correlation between bonds and equities over the past five years, particularly in a higher-for-longer interest rate environment, with private credit and broader credit markets viewed as facing growing default risk. In Marquet’s view, this leaves portfolios more concentrated in risk when investors rely solely on the classic 60/40 split.
Marquet argues that sequencing risk is now a central challenge for retirees and pre-retirees. Retiring into a market downturn is said to dramatically shorten the life of a retirement portfolio and cut sustainable income, whereas retiring into strong markets may extend portfolio longevity many times over. Volatility, which may feel like an opportunity at age 35, is framed by Marquet as a major threat in retirement when capital must fund regular income.
To address this, Marquet advocates prioritising downside protection, capital resilience and income certainty. Contractual lifetime income streams and annuities are highlighted as tools that can provide guaranteed income not tied directly to market performance. Products such as Allianz Guaranteed Income for LIfe (AGILE) are cited as offering equity market upside with full downside protection, aiming to improve risk-adjusted returns while supporting broader portfolio diversification.
