Bernstein - Implementing Liability Matching and Risk Portfolios - in 2020

Thrugelmir

itwasntme001 said:

Linton said:

Thrugelmir said:

gm0 said:

His stricture on not regarding corporate bonds as "riskless" assets would seem to kick a lot of bond fund options to the curb.

Corporate bonds are highly correlated to shares. When a company goes "bust". You'll suffer the double whammy of a total write off in your investments. 

You can handle companies going bust simply through diversification - have a broad rajnge of corporate bonds and dont let corporate bonds as a whole have a dominant allocation in the portfolio..  More of an issue is large extended falls in equity value.  As long as the corporate bonds continue to pay interest  there is no great problem.

Has QE distorted the price of corporate bonds so much that they simply can not be included in any portfolio given poor risk reward?  The FED have been active buyers of corporate bonds.

The BOE has been purchasing corporate bonds as part of it's own QE programme.

gm0

The book does make use of historic returns (all - US, foreign, full histories).  He's declares his preferred data sources and their limitations. But it also talks about the post 2008/9 contemporary trends of mid 2010s so this is not a "buy a TIPS ladder job done" old fashiioned US book based on pre GFC equity and bond average returns.  That's not where he's coming from.

I guess he's just not persuaded that the absence of decent implementation options actually affects the core argument about whether someone with scant assets to achieve their "essential" retirement income, at a life stage where other earning potential etc is diminished has any business in risk assets within the LMP.    Risking as it does - retirement failure i.e. failure to meet the investment goal but with teeth (different countries having different state pension provisions).

I found this useful to think about how my fund value, my SP+spouse pensions (GI), and other contingency non-pensions assets could be positioned to influence the LMP and RP portions. From this - what risk asset/equity blend would in fact be "correct" per this cautious thinking for my particular situation. 
In practice a lower bound % equities (compared to other risk embracing approaches) for a possible portfolio of equties (and related risk assets) alongside a risk avoiding portion (still targeting inflationary return but in todays' choices).

The main and strict theme of the book arguably is dividing the investable world into of risk assets and (relatively) riskless - critically - which retain that behaviour in a crisis short of war or fiat currency collapse. 
The fact the exchange rate between the two varies between boom and crisis being another theme visited repeatedly.  Both as a problem (to be managed) and an investment opportunity

JohnWinder

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

Linton

JohnWinder said:

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

Neither do bonds except for Index Linked bonds for partial protection against well above currently normal inflation levels.  However "safe" bonds carry the risk of large reductions in capital value once interest rates rise.  The only viable inflation protection available at the moment sadly is equity or an inflation linked annuity. The latter has the major disadvantage of being totally inflexible.  Of course there are physical assets like gold, fine art etc which should in the long term match inflation but their volatility would rule them out in my view.

My own strategy is I think similar to LMP, though I had never heard of LMP before this thread, For the inflation matching I rely on Wealth Preservation funds, hoping a manager with that objective can balance equity and other investments better than I can or have time to do.  This is coupled with a highly diversified equity/bond/others Income portfolio to provide a somewhat reliable income despite changing capital values.

I agree with your comments on just going for a particular equity/bond mix.  In retirement you have specific needs which cannot be adequately covered by a simple 20/40/60/80 % bond allocation chosen on your psychological attitude to risk.

michaels

I am sure the govt could issue one year index linked bonds that returnd cpi minus 1% and be massively oversubscribed.  Given that would give them access to money with a negative real cost why do they choose not to do this?  It would be hugely useful to every pension saver.

[Deleted User]

Linton said:

JohnWinder said:

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

Neither do bonds except for Index Linked bonds for partial protection against well above currently normal inflation levels.  However "safe" bonds carry the risk of large reductions in capital value once interest rates rise.  The only viable inflation protection available at the moment sadly is equity or an inflation linked annuity. 

1. Returns on bond funds suffer in cases of unexpected jumps in inflation. Expected inflation has no impact. Conversely, shares suffer during deflation.
2. There are other tools which protect from inflation. For example, rate reset preferred shares. 

JohnWinder

Sorry to have been a bit sloppy in my writing, referring to inflation linked government bonds as 'bonds' on one occasion. A LMP is an attempt to provide future income to meet liabilities, which means it must have inflation protection, with as little default risk as possible, which means government bonds not commercial bonds in the same way that one might prefer a state pension rather than a commercial annuity from an institution which could default.

Linton said:

Neither do bonds except for Index Linked bonds for partial protection against well above currently normal inflation levels.  However "safe" bonds carry the risk of large reductions in capital value once interest rates rise.  The only viable inflation protection available at the moment sadly is equity or an inflation linked annuity.

I wasn't aware that index linked government bonds offer only 'partial protection against well above currently normal inflation'. My understanding is that 'Index-linked gilts differ from conventional gilts in that both the semi-annual coupon payments and the principal payment are adjusted in line with movements in the General Index of Retail Prices in the UK (also known as the RPI).' https://www.dmo.gov.uk/data/gilt-market/index-linked-gilts/  That suggests to me that their coupon and adjusted face value move precisely with inflation however large or small it is. Important to note, of course, that their yield is negative now so you'll get back less than you invest; but a LMP is all about providing certainty of income to meet your liabilities, the returns on your investment have to be accepted for what they are which is low, that being the cost of certainty.

Secondly, large reductions in capital value once interest rates rise is irrelevant for bonds held to maturity. The bond issuer promises to return your (inflation adjusted) principal at maturity; it is a known amount, hence useful for a LMP. This is why a LMP needs a bond ladder: a collection of individual inflation linked government bonds which are held to maturity and whose coupon payments and return of principal provide a (somewhat 'lumpy') guaranteed income. And it's a non-rolling bond ladder because the maturing bonds are not used to pay for another round of bond purchases, that would be a rolling bond ladder. So an obvious shortcoming of a non-rolling bond ladder for a LMP is that you may not know the date your liabilities extend to.

We can all dream up our own secure retirement income plans, but the LMP Bernstein, Lussier, Pfau, Merton, Brodie et al are talking about has no place for equities because of their volatility and unpredictability.

michaels said:

I am sure the govt could issue one year index linked bonds that returnd cpi minus 1% and be massively oversubscribed.  Given that would give them access to money with a negative real cost why do they choose not to do this?  It would be hugely useful to every pension saver.

There is currently an issue of a bond like that yielding RPI minus 3%, so there's no chance they'll offer one with minus 1% (or so the taxpayers should hope!).

And to be clear, a bond fund won't cut the mustard for a LMP because a bond fund with a fixed duration is not a predictable match for liabilities which vary from next year to perhaps 30 years in the future. Bonds best match liabilities when their duration matches the duration of the liability if you're concerned about fund values falling when interest rates rise - and a LMP must deal with this. A possible solution is a combination of two bond funds, sorry index linked government bond funds with a long and a short duration, held in varying proportions to match the decreasing duration of the consumption liability. For a fuller explanation: https://www.bogleheads.org/forum/viewtopic.php?t=240325

Linton

The problem with Deleted_User said:

Linton said:

JohnWinder said:

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

Neither do bonds except for Index Linked bonds for partial protection against well above currently normal inflation levels.  However "safe" bonds carry the risk of large reductions in capital value once interest rates rise.  The only viable inflation protection available at the moment sadly is equity or an inflation linked annuity. 

1. Returns on bond funds suffer in cases of unexpected jumps in inflation. Expected inflation has no impact. Conversely, shares suffer during deflation.
2. There are other tools which protect from inflation. For example, rate reset preferred shares. 

I have never come across rate reset preferred shares, they seem to be a US facility.

Audaxer

Linton said:

JohnWinder said:

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

I agree with your comments on just going for a particular equity/bond mix.  In retirement you have specific needs which cannot be adequately covered by a simple 20/40/60/80 % bond allocation chosen on your psychological attitude to risk.

Linton, I know that a straightforward 60/40 globally diversified equity bond portfolio will not suit all retirees, but for someone looking for a withdrawal rate of around 3.5% per annum increasing with inflation, is there any reason why you would consider their specific needs would not be covered by such a portfolio?

Linton

Audaxer said:

Linton said:

JohnWinder said:

That approach of Bernstein's will be suitable for some financial circumstances and personalities. There are others pushing the same idea, but we hear of few people who put it into practice, so its appeal seems narrow, despite it's apparent good sense (as you'd expect from Bernstein).

Zwelcher includes it in his book (but regret I can't remember the book title). He talks about the topic in terms of an 'income floor' - no matter how badly the investment world turns into, your assets provide a 'guaranteed' income floor such as you'd get from a lifetime annuity. His view is that, along the lines of the '4% rule', if your SWR is less than 3.5% then building an income floor with a LMP is not so necessary. But if your assets aren't adequate for that, he suggests putting some of them at 'high risk' as a way of building up a 'safe floor' to an adequate level, even if you need to put 'stop loss' limits on those investments to protect your prospective floor from finishing up too low.

Lussier in his book 'Successful investing is a process' likes the LMP approach despite its low expected returns, but he 'tweaks' it by suggesting having some assets in LMP and some in an at-risk portfolio (the mix depending on risk aversion and how well covered the liabilities are).  He proposes a dynamic management of all the assets, moving from the at-risk to the LMP depending on value measures like PE10 and yield. He also likes to track asset class volatility and correlations and make AA adjustments in the at-risk portfolio accordingly. That seemed a bit complicated to me, so I wave it away.

Huxley in 'Asset Dedication' suggests a 'watered-down' LMP by buying a non-rolling bond ladder for the first 5 (or more) years  of retirement, and puts the rest in shares.  This avoids a bad SoR (as long as it lasts <5 yrs!). The ladder amount must anticipate inflation (or use an inflation linked product), and you extend it for the next 5 yrs either at the end of the first five or yearly, or after there’s a good year or two for shares. He says this approach is better than trying to match your risk aversion with a stock/bond mix, there being no quantitative way to do this; I think that's the first time I'd read that, and it had a ring of common sense to it. How do 'they' convert your risk questionnaire score of 'x out of 100' into a 60/40 mix, in any validated way?

I think Bernstein and others suggests the following assets for a LMP: a non-rolling bond ladder; a lifetime inflation linked annuity; and long term health care insurance. But he's American so you won't need the last one.

While interest rates are low, lifetime annuities seem expensive and there may not be many products on offer. But that's the nature of these times, so you just put up with it if you want a LMP.  Exactly the same consideration applies to a non-rolling ladder of inflation linked government bonds: yields are negative, so you'll pay more for them than you'll get back in the end; but that's the cost of having a LMP which is as near as possible to a bullet-proof investment as you can do. It doesn't seem quite so bad when the alternative is a 'risk portfolio' of stocks and bonds, both having high prices and low yields from quantitative easing.

Cash is probably not a good choice for a LMP as it has no secured inflation protection; and a twenty five year retirement needs inflation protection.

I agree with your comments on just going for a particular equity/bond mix.  In retirement you have specific needs which cannot be adequately covered by a simple 20/40/60/80 % bond allocation chosen on your psychological attitude to risk.

Linton, I know that a straightforward 60/40 globally diversified equity bond portfolio will not suit all retirees, but for someone looking for a withdrawal rate of around 3.5% per annum increasing with inflation, is there any reason why you would consider their specific needs would not be covered by such a portfolio?

My comment was mainly about the use of packaged multi-asset funds for a retirement portfolio with the specific need in this case being risk managment. You need to be able to control the equity and the non-equity portions separately.

As I have said many times, I am nervous about the over-use of safe bond funds in the non-equity portion. For the past 40 years interest rates have been falling whch has led to a long term increase in bond fund capital values.  Now we are close to zero interest, what happens in the medium term future? Also, again as I said in a previous post, the non-equity needs to have an objective.  Merely being non-equity is not sufficient.

It makes sense to manage it jointly with the buffer and to devote at least as much  attention to diversifying its holdings as to the equity side especially as I see configuring non-equity as a more difficult task than equity where a single global tracker could be sufficient.  LMP seems to be operating in this area but I do not understand how what is being proposed there works in a close to zero interest world.

With a strong set of non-equity holdings securing the short term and to some extent the medium term you can look at taking more risk with the equity side than would otherwise be the case.

I use the terms equity and non equity, it would be clearer and more accurate if I had talked about "at risk" and "low risk", or something like that.