Retirement Portfolio Resilience Perspective
Primary Pillar: Retirement Portfolio Construction
Supporting Pillars: Sequencing Risk Awareness • Risk Pricing Discipline
This early edition of Gyrations examines the unique challenges of retirement portfolio construction and explains why changing market conditions require a broader range of portfolio management approaches than traditional growth and defensive asset allocation alone.
Viewed through today's Retirement Portfolio Resilience Framework, the enduring principle is that retirement portfolios should be designed to remain resilient across changing market environments by combining long-term growth assets with complementary protection strategies that help address sequencing risk and reduce dependence on favourable market conditions. While the investment terminology reflects the environment in which the publication was written, it represents one of the earliest public expressions of the architectural thinking that ultimately evolved into Retirement Portfolio Resilience.
This publication forms part of Gyrostat's historical research archive documenting the evolution of the Retirement Portfolio Resilience Framework.
Sequencing risk is the risk that markets fall near or early in retirement. The value of investments falls as you need to draw it down for living expenses. Sequencing risk caused significant financial and emotional consequences to those who retired around 2007 at the time of the global financial crisis.
Stock market corrections historically occur every 4 1/2 to 5 1/2 years. From 1929 to current, the range of falls and duration has been 25% to 90% and duration of decline 22 to 160 weeks. The last correction occurred over 7 1/2 years.
The Gyrations risk model consider the implications of geopolitical, macroeconomic and company valuations on investor risk. Increased volatility is often experienced around key data releases relating to interest rates, growth, inflation rates, and key political events.
Our report details the investment landscape (in pictures) with dates of key upcoming data releases.
Risk managed equity funds protect against the effects of sequencing risk by at all times protecting the downside, ensuring the consequences of significant market falls do not materially adversely impact retirement lifestyle.
