Thesis Asset Management will launch a decumulation portfolio service next week, which it claims is unique in the way it delivers long-term income while mitigating the risks of investing in the near term.
The Managed Income Service will split the portfolio into two pots - one investing in lower-risk defensive assets targeted at wealth preservation from which the income will be drawn and another, where the bulk of the assets will sit, investing in higher-risk growth assets to increase the portfolio's value over time.
Lawrence Cook, director of marketing and business development at Thesis, said the portfolio had been constructed this way to address issues such as pound-cost ravaging and to prevent the need for growth assets to be sold when an income is drawn.
The portfolio is gradually migrated, typically over a five-year term - though advisers can pause or speed up this process - until it is fully invested in the model portfolio that matches the client's risk profile.
Mr Cook said: "Advisers are increasingly aware of the different risks investing for income brings compared to the savings or accumulation phase.
"Investors face a number of risks as they reach the age of retirement and can access their pension pots.
"Volatility, inflation, longevity and sequencing risk can all have devastating effects on portfolios, so it is vitally important that products and services are available to help people plan their finances throughout retirement.
"The new service aims to give investors peace of mind in the early years of drawing income from their portfolio, while maximising the opportunity for the bulk of their investments to grow over time.
"Rather than capture all the movement of underlying markets, it is designed to reduce the exposure to the riskier assets early on, and give the portfolio a better chance of delivering income over the long term."
Mr Cook highlighted how a 30 per cent drop in a portfolio's value in the early years could have a much more significant effect than one which took place later in retirement.
He said that a £500,000 portfolio would be £90,000 smaller if this happened in the first year of retirement compared to the last year, which he said highlighted the need to protect a retirement pot from volatility early on.
The Managed Income Service carries the same management fee as Thesis's existing model portfolios.
Martin Bamford, a chartered financial planner at Informed Choice, said: "Decumulation investment strategies are coming sharply into focus as a growing number of wealthy baby boomers enter retirement and market conditions prompt fears of equity market falls in the near-term.
"Thesis have come up with a sensible strategy which could help protect long-term wealth by focusing withdrawals on a ‘safer’ pot of money, leaving the bulk of retirement funds exposed to typically more volatile growth assets.
"There’s no escape from market volatility, unless you opt for cash and the low-growth consequences of that approach, but constructing sensible decumulation portfolios based on the latest research is important to manage the investment experience in later life."
Thesis Asset Management, which is based in Chichester, has approximately £14.2bn of funds under management and administration.
damian.fantato@ft.com
