Every investor views risk differently. Some are aggressive and want to maximize growth. Others prefer stability and capital preservation. Most clients fall somewhere in between.
One alternative approach some advisors are using is to build two core portfolios—one aggressive and one conservative—and then blend them into a single solution based on the client’s risk tolerance.
Two Sleeves, Customized Allocation
This method uses two “sleeves”:
A conservative sleeve focused on lower volatility (4-6% stdev) and downside protection.
An aggressive sleeve designed for growth and higher return potential.
Advisors then allocate to each sleeve depending on the investor’s profile. For example:
A moderate client might be allocated 40% conservative and 60% aggressive.
A conservative client might be 85% conservative and 15% aggressive.
An aggressive client might go 85% aggressive and 15% conservative.
This structure allows for customization without the need to create a new portfolio for every individual client.
Building the Sleeves with the Portfolio Optimizer
These sleeves are typically built using the iQUANT Portfolio Optimizer, which helps ensure each portfolio is:
Simple – just two sleeves to work with.
Rules-based – following a time-tested and repeatable process.
Flexible – enables advisors to go beyond bonds when managing the “conservative” allocation of their portfolios.
The Optimizer looks at how different iQUANT models work together and builds sleeves that match your risk and return targets—keeping the process simple and professional.
What Some Members Are Doing
We’ve seen some members elect to use the iQ Sector Extremes Portfolio as their aggressive sleeve. This model includes 20 equal-weighted stocks—half defensive, half high-beta—designed to combine offense and defense in a single portfolio. It is updated and reconstituted quarterly, which helps keep trading activity manageable while ensuring the portfolio stays aligned with current market conditions.
Why Advisors Like This Approach
Saves Time – Only two core models need to be maintained, with flexible application across your book.
Supports Compliance – The process is rules-driven and transparent.
Easy to Explain – Clients understand the concept of blending two portfolios based on their personal comfort with risk.
The two-sleeve design is only one method for designing portfolios. It's simply an approach some advisors are integrating into their portfolios - particularly when using the Portfolio Optimizer.