Mitigating sequence of returns risk

How does performance of different model portfolios for accumulation and decumulation stack up. Making regular withdrawals.

Model Portfolio Performance Comparison. Comparing accumulation and decumulation of strategies for accumulation and decumulation. Mitigating sequence of returns risk

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Differentiated performance of portfolios for accumulation and decumulation

Performance for portfolios is challenging, but at times like these we have to step back and think about end-client objectives.  For clients in accumulation, equity market volatility is part and parcel of returns.  For clients in decumulation, sequencing risk is a challenge.  This is why Elston Portfolio Management's Retirement Portfolios have a bucket-based approach built in, mitigating downside risk in times of market shock.  You can see the performance of the "off-the-shelf" accumulation range ("Elston Adaptive") and decumulation range ("Elston Retirement") in this table

About our retirement strategies

Trump’s tariff shake out of the markets creates sequence of return risk for clients taking a regular income.
That’s why we launched Retirement portfolios in March 2021 that are purpose-built for decumulation.
They use a bucket-based approach to dampen volatility in times of market stress.
In times like these.
So whilst nobody is celebrating seeing so much red on the screen, we are quietly satisfied that the portfolios we design for our DFM and IFA clients are doing what they say on the tin:

1. We use multi-asset indices built for UK, not global investors, as a starting point
2. We adapt portfolios to help navigate market risks – which had led to continued outperformance YTD vs both UK and global multi-asset indices.
3. Our retirement strategies use a bucket-based approach, meaning downside risk has been cushioned.

Mitigating sequence of returns risk

Mitigating sequencing risk is key for clients in decumulation.  The bucketing approach helps with this.  But portfolio design can only go so far: the real mitigation is advisers working out a durable cashflow plan with their client and keeping it up to date.  Nonetheless, we are glad that despite all the market stress - both are delivering on their objectives and design.

The chart above shows the performance YTD of Elston's Accumulation & Decumulation Strategies (100% Equity risk).  The chart below shows the performance YTD of Elston's Accumulation & Decumulation Strategies (60% Equity risk).

About the Elston Multi-Asset Indices

Elston Multi-Asset Indices are for UK DFMs and IFAs and have (20% UK Equity Bias/80% UK Bond Bias).  On FE, search for "Elston" under "Market Indices."  
They enable the evaluation of a multi-asset portfolio or multi-asset fund relative to an investable strategic asset allocation benchmark.  This enables not only performance comparison, but also attribution analysis which is not possible with "peer groups" such as Mixed Investment fund sector averages.
This 100% equity index GBP has a 80/20 Global/UK equity allocation split for a moderate "home bias" to represent a "neutral" equity allocation for GBP-based investors.
Thes 60% equity index GBP is a 60% equity, 40% bond index representing a neutral position for a "balanced portfolio" for GBP investors.
The Equity component has a 80/20 Global/UK equity allocation, the Bond component has a 80/20 UK/Global Bond allocation.
The suite of risk-rated multi-asset indices can be used as a benchmark for multi-asset portfolios and multi-asset funds. These indices are available on FE.