TY - JOUR T1 - Mind the Floor: <em>Enhance Portfolio Insurance without Borrowing</em> JF - The Journal of Investing SP - 39 LP - 50 DO - 10.3905/joi.2019.1.076 VL - 28 IS - 4 AU - Jan Annaert AU - Marc De Ceuster AU - Jürgen Vandenbroucke Y1 - 2019/05/31 UR - https://pm-research.com/content/28/4/39.abstract N2 - Legal borrowing restrictions are generally claimed to limit portfolio insurance performance. We explore two alternative rebalancing rules that aim to pick up excess return subject to a borrowing constraint. One set of rules manages a volatility target for the risky assets, a second set of rules manages the floor. Considering real life trading conditions, our simulation results confirm that the borrowing constraint lowers average returns. The risk-adjusted performance however increases, so there is essentially nothing wrong with the legal prohibition to borrow. Still, managing the floor enhances risk-adjusted performance even more. Tweaking the volatility of the risky assets does not.TOPICS: Legal/regulatory/public policy, portfolio construction, risk management, performance measurement ER -