Retirement Portfolio Resilience Perspective
Primary Pillar: Retirement Portfolio Construction
Supporting Pillars: Sequencing Risk Awareness • Risk Pricing Discipline
This article examines the challenge of constructing retirement portfolios capable of delivering regular income, capital growth and embedded downside protection throughout changing market conditions.
It explains how dynamic hedging can form part of a disciplined portfolio construction process designed to address the structural challenges facing retirees, including major market declines, sequencing risk and the need to remain invested over extended retirement periods. Although written before the Retirement Portfolio Resilience Framework was formally articulated, the article establishes many of the enduring principles that would later define Gyrostat's philosophy of helping investors remain financially and emotionally invested throughout their retirement journey, regardless of the path markets take.
This article forms part of a broader body of research, educational articles and practical insights organised through the Retirement Portfolio Resilience Framework.
Dynamic hedging can solve the retirement income product dilemma
Craig Racine, Managing Director and Chief Investment Officer of Gyrostat Capital Management
The problem: A lack of retirement income products which protect and grow capital through the complete investment cycle
What is needed: Retirement income product specifications – the criteria to be satisfied
The solution: Dynamic hedging – technology to the rescue - "blue chip shares with protection for retiree income"
In plain speech, when Gyrostat utilises dynamic hedging of every $ 1 invested, approximately 95c buys the stock, and around 5c the lowest cost protection. As the market price moves, the “gyrostat” is brought back into balance to restore this 95:5 recipe. This means if the stock falls, the value of protection goes up – the protection has done its job and a portion is sold for cash. On stock rises, the value of protection falls and more is acquired.
