Context
After a rapid market correction, the client’s portfolio drifted below minimum equity weights while cash rose from defensive sales made outside any documented process. Fear of further losses competed with IPS requirements to maintain growth for a 20-year horizon.
Framework
We separated risk capacity (unchanged objectives) from risk perception (temporary stress). A three-tranche re-risking plan deployed cash into diversified equities over eight weeks, with pause triggers if realised volatility exceeded pre-set thresholds. Each tranche required written client consent tied to IPS clauses added for drawdown events.
Problems solved
- Ad hoc sales that breached IPS minimum growth.
- Absence of pre-agreed re-entry rules causing paralysis.
- Reporting that highlighted peak-to-trough loss without horizon context.
Results
Allocation returned to policy bands within ten weeks. Client retained emergency cash above IPS minimum. Subsequent reporting added “distance to policy” metric to reduce emotional focus on single-day moves.