The average age of retirement in the United States is 63 and the average length of retirement is 18 years, thereby making retirement a long-term liability. While these options may produce modestly higher levels of current income, both come at a cost of significantly increased volatility and neither addresses the reality that retirees require high-distribution tools that may minimize the risk of idiosyncratic market dislocations. Investors can seek to address this shortfall by reaching down the scale of fixed-income credit quality (to aptly named “junk” bonds) or through exposure to other income-producing asset categories that carry high levels of idiosyncratic risk. Treasuries3, let alone maintaining any expectation of keeping pace with inflation. Unfortunately, in an era of low interest rates, few investors have sufficient retirement savings to fund future withdrawal requirements with a portfolio of government-guaranteed bank deposits or U.S. This paradigm shift means every day more and more people need a steady, dependable and consistent distribution from their investment portfolios. The macroeconomic and demographic demands of this post-WW2 generation will reshape the investment management industry, as the focus of baby boomers shifts from wealth accumulation to finding solutions to manage the drawdown phase of their investment lives. Investors Objectives are Changing from Accumulation to DrawdownThere are 79 million baby boomers and over the next 30 years a staggering 10,000 people a day will retire. “ What the world needs is real solutions for people who are in the drawdown portion of their investment life.”2
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