PIMCO said as the population ages and super members gear for retirement, superannuation funds need to revisit asset allocation to align the fund's investment strategy with members' best interests.
They said the next generation of funds would be "outcome-oriented", particularly focused on lifecycle strategies which gradually increase allocations to lower risk assets as members approach retirement.
Investment default options should maximise the likelihood that the majority of members will meet their retirement income needs as well as incorporate the member's capacity for risk, PIMCO said.
Although PIMCO said funds could not take into account all individual characteristics of members, incorporating age into asset allocation decisions takes into account a member's capacity for risk.
PIMCO said although average performance might be better for the traditional 75/25 balanced portfolio, more members achieve their outcome or retirement target trading away some upside return for greater certainty, with a lifecycle option.
PIMCO said a default strategy should achieve an acceptable median outcome or middle outcome as well as a tight distribution around that middle outcome.
Potential losses were important to retirees who had little capacity to recover, the report said.
Government regulation and market intervention as well as slower global growth will characterise global markets and force the industry to review more sophisticated accumulation and decumulation strategies and design "outcome oriented funds such as lifecycle funds to meet members' retirement income needs", it said.