TY - JOUR T1 - Fund Success and Assurance Frontiers JF - The Journal of Portfolio Management SP - 59 LP - 72 DO - 10.3905/jpm.2021.1.294 VL - 48 IS - 1 AU - Martin L. Leibowitz AU - Stanley Kogelman Y1 - 2021/10/31 UR - https://pm-research.com/content/48/1/59.abstract N2 - 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’s maximum risk limit.▪ Longer horizons generally lead to higher peak returns that can enhance prospects of success. ER -