Do you want volatility-based portfolios to meet targets?

RISK-BASED PORTFOLIOS

At first, this looks like a no-brainer, of course you should. But, irrespective of whether you wish to go down the model portfolio route or choose to outsource to a retail multi-manager portfolio or discretionary manager, the answer, I would suggest, should not necessarily be a resounding ‘yes'.

Why? – Because it depends on your perspective. Yes, you do want the volatility target met from a compliance point of view, but ‘no’ you don’t always want it met from the point of view of protecting investors’ capital. From a compliance perspective it might be seen as the ideal scenario – an investor has been risk assessed as a ‘4’, the recommended portfolio has the commensurate risk profile at outset and, ultimately, the portfolio’s long term annualised volatility stream is maintained within a volatility band suitable for an investor who has a risk profile of ‘4’. But, our research ha...