1.5x Equity Accumulation Portfolio

Much of the research around accumulation suggest that an investor who is willing to utilize leverage would want ~1.5x exposure to equity. This data seems to assume an investor with a 100% equity portfolio. Therefore, I’ve built a more diversified portfolio that targets roughly a 1.5x beta to global equity and then allows a mean-variance optimizer to add diversifiers with the goal of maximizing diversification. Since equities tend to have low sensitivity to unexpected inflation over long time horizons, I added a constraint to keep the portfolio’s expected inflation beta greater than 0 to avoid taking on large amounts of inflation risk as the means for outperforming.

The result seems to be that we can achieve a similar return over the long-term to a 1.5x levered exposure to market-cap-weighted global equity, but with a lower max drawdown and standard deviation.