@article {Leibowitzjpm.2021.1.294, author = {Martin L. Leibowitz and Stanley Kogelman}, title = {Fund Success and Assurance Frontiers}, elocation-id = {jpm.2021.1.294}, year = {2021}, doi = {10.3905/jpm.2021.1.294}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Investment fund investment strategies and asset allocations typically are based on a multiplicity of complex (possibly competing) goals that often are incorporated in a simple return target. The challenge is to develop a portfolio whose expected return at least equals the target but has a volatility less than a disaster-avoidance risk limit. However, such a goal-matching return only provides a 50/50 chance of success. Truly important goals may require a higher probability of success, such as 60\%. This article focuses on efficient portfolios and the return they can provide with a specified probability of assurance. The key step is to map the efficient frontier into an assurance frontier that plots risk-adjusted returns with a 60\% success probability. This frontier typically has a peak return that is the highest available risk-adjusted return. In some cases, this peak portfolio is at the risk limit. In other cases, even with a monotonically rising efficient frontier, the peak may fall well below the maximum volatility limit.Key Findings▪ Portfolios with expected returns that just match a goal-based target may have only a 50/50 assurance of success (even after those targets have been properly revised to account for, e.g., inflation, fund expenses, and geometric effects).▪ Portfolios that have the best risk-adjusted return can sometimes be found at a volatility that is well short of a fund{\textquoteright}s maximum risk limit.▪ Longer horizons generally lead to higher peak returns that can enhance prospects of success.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/early/2021/10/02/jpm.2021.1.294}, eprint = {https://jpm.pm-research.com/content/early/2021/10/02/jpm.2021.1.294.full.pdf}, journal = {The Journal of Portfolio Management} }