Retirement Portfolio Resilience Perspective
Primary Pillar: Retirement Portfolio Construction
Supporting Pillars: Risk Pricing Discipline • Resilience Across Market Environments
This early edition of Gyrations explores the limitations of traditional income and growth portfolios and explains why portfolio construction should evolve to include complementary approaches designed to improve resilience across changing market environments.
Viewed through today's Retirement Portfolio Resilience Framework, the enduring principle is that resilient retirement portfolios should not rely solely on conventional asset allocation. Instead, long-term growth assets can be complemented by resilient portfolio construction that reduces dependence on favourable market conditions through disciplined capital allocation and appropriately priced protection. While the investment terminology reflects the market environment of its time, the underlying architectural philosophy has remained consistent throughout the evolution of Retirement Portfolio Resilience.
This publication forms part of Gyrostat's historical research archive documenting the evolution of the Retirement Portfolio Resilience Framework.
In this monthly report we provide data to assist in assessing risk in an equity portfolio. Substantial changes to market valuations often occur as investors adjust portfolios for new data, particularly where it differs from the ‘consensus’ view.
Key indicators we consider are:
- Global macro conditions (in pictures)
- Key upcoming data releases, with market pricing of outcomes (where available)
- Interest rates
- GDP announcements
- Inflation announcements
- Geopolitical developments
We consider the market pricing of ‘risk’ and current market valuations.
- Volatility
- Share price levels
Our overall assessment, which is shared by many other commentators, is that in this macro environment, both ‘income’ and ‘growth’ asset classes have fragilities.
With this view, there is a need to expand the range of ‘income’ and ‘growth’ assets to include risk managed equity funds. Such funds trade off some of the upside to ensure against downside risk. It is possible to manage the risk profile of such funds by varying the underlying assets and the risk-return parameters.
