Industry evolution - from accumulation to retirement phase solutions
- Solutions are required for equity risk management and income in retirement.
- Risk management against large equity falls can be achieved by adding a small downside protection allocation to the portfolio. Protection is always in place (not relying on forecasts), with large cash distributions available for re-investment on major market falls.
- A portfolio with a 20% allocation to Australian equities could be protected against large losses by adding a 1% allocation to an Australian downside protection fund.
- Equity income can be delivered through all phases of the investment cycle (including large market falls) by including in the conservative asset allocations an absolute return income equity fund. These funds hold a ‘hard’ defined risk tolerance (say no more than 2% capital at risk). The fund holds a diversified portfolio of higher yielding stocks, delivering regular income by passing through dividends. Protection is always in place at the stock specific level. Returns are designed to increase as volatility levels increase, as this provides more opportunities to lower protection costs.
- The Gyrostat Absolute Return Income Equity Fund has an 8 year track record of delivering protection and income.
