Research summary

Yes, the credit risk premium is worth it

May 03, 2023

Risk–return chart for a 60% equity/40% fixed income portfolio shows expected metrics for a base or “4 totals” portfolio, three VAAM optimized asset mixes with credit tilts, and a VAAM optimized 65% equity portfolio without the credit tilt. The steady state median expected volatility and steady state median expected return are, respectively, 10.0% and 7.5% for the base portfolio; 10.2% and 7.5% for the credit tilt portfolio asset mix 1; 10.5% and 7.7% for asset mix 2; 10.2% and 7.6% for asset mix 3; and 10.7% and 7.7% for the VAAM optimized 65% equity portfolio without the credit tilt.


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