Using Value at Risk Strategies to Enhance the Performance of Balanced and Lifecycle Funds Some Australian Evidence

10 Pages Posted: 18 Oct 2015

See all articles by John Okunev

John Okunev

Bond University Business School

Date Written: June 16, 2015

Abstract

The funds management industry provides numerous financial products to help investors accumulate wealth in preparation for their retirement. Typically financial products such as balanced funds and lifecycle funds have been the most popular. Recently because of the two major bear markets from 2000 to 2010 there has been considerable interest in developing investment strategies that focus on risk rather than returns. In this paper we propose a glide path value at risk (VaR) approach that takes into account the time variation of risk and return. We show that the glide path VaR approach outperforms the terminal value of a 60/40 balanced fund by up to 35%. Furthermore, we propose that lifecycle funds should not be “age based” but should be “risk based”.

Keywords: Value at Risk, Lifecycle funds

JEL Classification: g11, g15

Suggested Citation

Okunev, John, Using Value at Risk Strategies to Enhance the Performance of Balanced and Lifecycle Funds Some Australian Evidence (June 16, 2015). Available at SSRN: https://ssrn.com/abstract=2675406 or http://dx.doi.org/10.2139/ssrn.2675406

John Okunev (Contact Author)

Bond University Business School ( email )

Gold Coast
Australia

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