Growth Optimal Portfolio Insurance For Long-Term Investors

We solve for the growth-rate optimal multiplier of a portfolio insurance strategy in the general case with a locally risky reserve asset and stochastic state variables. The level of the optimal time-varying multiplier turns out to be lower than the standard constant multiplier of CPPI for common parameter values. As a consequence the outperformance of the growth-optimal portfolio insurance strategy (GOPI) does not come with higher risk. A revisited version of this paper is forthcoming in the Journal of Investment Management.