Bond Tents: Reshaping the Equity Glide Slope at the End of Wealth Accumulation

Asset allocation is widely accepted as a primary driver of portfolio returns over time. Conventional investment practice recommends that investors reduce their risk and thus increase their allocation to fixed-income investments as they approach retirement. This research extends the literature by examining the shape of the fixed-income glide slope prior to retirement. The results suggest that portfolios with high fixed-income allocations, or bond tents, can serve investors well, and nonlinear glide slopes can produce favorable portfolio characteristics for investors. TOPICS:Fixed income and structured finance, portfolio construction, retirement