Investors and advisers are having to face up to some new issues in portfolio construction as the low inflation environment sets in globally.
One of the biggest issues is that income is decreasing, yet fees are staying up.
In New Zealand investors have seen their income from cash-type investments slashed as bill rates have plummeted from 10 per cent to hover just above the 4 per cent mark.
This has triggered an exodus from the likes of bank deposits to high-yielding shares, and property investments.
However, the outlook is for returns from most asset classes to trend down.
Paul Cheever, who is the general council and executive officer of the Commonwealth and Public Sector Superannuation Schemes in Australia, told the recent Super funds conference in Wellington that the level of returns investors can expect from their assets will fall, as will yields.
He suggests 90 day will move to be under 2 per cent, long bonds 4 per cent, dividend yields will be around the 1.5 per cent mark and long term capital gains on equities will be small, "maybe a few per cent".
Cheever predicts there is a "coming cost crunch" for investment funds.
Likewise Guardian Trust chief investment officer Michael Good also highlighted the fee issue at the IPAC Conference in Hamilton yesterday.
He says that as returns fall advisers need to be careful their fees are gobbling up a greater proportion of their clients' returns. Good Returns will provide more detailed coverage on these and associated issues.
Investors and advisers are having to face up to some new issues in portfolio construction as the low inflation environment sets in globally.