Market shifts, rising risks and AI-driven volatility are challenging retirement income stability. BNY Investments Newton multi-asset portfolio manager Paul Byrne discusses why dynamic risk management and active multi-asset strategies are essential for steadying the ship.
Over the past decade, market structures have fundamentally changed. Globalisation has reversed, governments are spending more than ever, and accelerating technological advances, including AI, are reshaping capital flows – making event-driven volatility more unpredictable than at any point in recent memory.
For retirees, even more insidious threats are emerging. Inflation, rising concentration risks and tighter correlations are eroding the ability to protect hard-earned income and making drawdowns more pronounced.
Why resilience is needed
Unsurprisingly, the question at the top of many advisers’ minds is: how can I build resilience against retirement income erosion?
At BNY Investments, we believe that investment solutions which fully integrate dynamic risk management are critical to achieving diversification and, therefore, resilience during periods of market stress.
Diversification in passive management is becoming increasingly hard to come by. Five years ago, the top 10 holdings in the MSCI World Index accounted for around 15% of the index’s weight. Today, that figure has almost doubled, to closer to 30%.
In 2022, during one of the sharpest bond market sell-offs on record, global bond markets fell by more than 15% as interest rates spiked. A surge in correlations meant that some traditionally lower-risk strategies, with higher allocations to fixed income, lagged higher-risk strategies.
Advisers need confidence that the risk-rated strategies they recommend will behave as expected.
This blindsided more conservative investors and eroded capital at precisely the point in the retirement lifecycle when stability mattered most.
The old assumption that “a rising tide lifts all boats” no longer holds. Market downturns are likely to be deeper and more damaging.
When that happens, some advisers will face the uncomfortable task of explaining that future income and comfort in retirement may be impacted. Withdrawing during a severe market downturn can do lasting damage to a client’s ability to generate income and preserve capital.
Consistency is integral
Against today’s backdrop of unprecedented challenges, consistency is king. Advisers need confidence that the risk-rated strategies they recommend will behave as expected and deliver outcomes aligned with client expectations.
Advisers expect clients to change investment strategy due to volatility.
That means selecting managers with repeatable processes and a clear ability to actively manage risk within defined parameters.
An active, multi-asset, volatility-managed fund range can help buffer market shocks and dynamically adapt to changing financial conditions.
Multi-asset managers have the full investment universe at their disposal and can adjust exposure across asset classes when capital protection becomes critical. When bonds and equities fall in tandem, as they did last spring, they can actively de-risk portfolios.
Markets showed renewed signs of vulnerability in 2025, with sharp spikes in volatility that may foreshadow more frequent and severe disruptions ahead.
Continuous risk management offers the best chance of generating smoother, more resilient return profiles.
Risk management
With fewer safe havens and more sources of systemic risk, proactive and adaptive risk management – rather than reliance on historical patterns alone – is essential to protecting retirement income. Continuous risk management offers the best chance of generating smoother, more resilient return profiles.
Whether clients are accumulating wealth or decumulating assets, volatility-managed strategies give advisers flexibility to tailor solutions to personal goals and risk appetites.
Advisers understand their clients’ life stages, objectives and tolerances. They need transparent investment managers who deliver the growth and downside protection their funds claim to provide – supported by consistent performance and robust, repeatable risk processes.
A version of this article first appeared in Money Marketing, a monthly magazine and website for financial intermediaries in the UK.
The value of investments can fall. Investors may not get back the amount invested.
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