If these inputs are tested and changed very slightly thousands of times, an average asset allocation can be taken, enabling more stable and robust portfolios to be forged.
By taking such an overall approach, at the same time as seeking to manage any risks posed by markets over the short term, fund managers should be able to create portfolios capable of generating the capital growth from which a sustainable income can be drawn.
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Such portfolios would be built to navigate the needs and circumstances of retirees, which are so very different to those of people seeking to accumulate assets ahead of retirement.
Anthony Gillham is manager of the Old Mutual Generation Portfolios, Old Mutual Global Investors
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