Gyrostat August Outlook: Calm Endures, Yet Conviction For Protection Grows

Volatility remainssubdued, and equity markets are elevated; yet history teaches us that this calm rarely endures. With protection still relatively inexpensive, investors today have a rare opportunity to strengthen resilience before conditions shift. 

As markets drift higher, complacency can take hold. Many will insure their homes,health, cars, jewellery, yet neglect to actively protect their most critical asset, retirement capital. That oversight puts capital at risk during the seemingly stable periods, when risk feels remote. Protection bought in calm markets is like insurance purchased before the unknown storm: more effective and more affordable than waiting until after damage has begun, when options are expensive or non-existent. 

A Risk-Management Lens 

True financial security comes not from predicting market direction, but from constructing portfolios that can withstand the unknown. Our approach views current conditions through a risk-management lens, building diversification and protection into portfolios by design. This proactive scenario planning reduces reliance on forecasts and helps address the “sequencing of returns” risk that can devastate retirement balances if losses occur early in drawdown years. 

We elaborate on this in detail, along with the limitations of financial theory as it applies to portfolio construction for lower-risk investors, in our recently published guide: 

Risk Managed Investing:  A Structured Guide from Accumulation to Retirement 

https://www.gyrostat.com.au/news/risk-managed-investing/ 

Current Market Backdrop 

Despite many equity indices trading near record highs, risk remains systematically underpriced. Volatility measures such as the VIX suggest that the cost of protection is unusually low, offering forward-looking investors a particularly attractive entry point. 

For lower-risk investors, replacing passive long-only equity exposure with a risk-managed absolute return strategy offers true diversification beyond traditional asset splits. This is less about tilting growth versus defensive assets and more about embedding consistent protection regardless of the scenario. 

Source: Google Finance -INDEXCBOE: VIX 

Evidence of Resilience 

Gyrostat’s risk-managed strategies are designed to deliver peace of mind across conditions. Class A has maintained a 14-year track record without a single quarterly drawdown beyond its 3% risk tolerance. Our index-linked Classes C, D and E extend the same discipline to Australian, Hong Kong and global equity markets, giving investors diversified access while retaining defined protection. 

Outlook 

Looking ahead, we expect realised volatility to rise and the risk of large downside “gaps” to remain elevated. In this environment, investors face a choice: continue to rely on predictions or proactively construct portfolios that can weather a wide range of outcomes, including significant market declines. 

For retirees and conservative investors, the current tranquil market environment should not breed complacency. Instead, it constitutes a strategic opportunity to solidify long-term financial stability. 

Gyrostat Capital Management prepared this document and it is intended only for Australian residents who are wholesale clients (as defined in the Corporations Act 2001). To the extent any part may be perceived as financial product advice, it is general advice only and has been prepared without taking into account of the reader’s investment objectives, financial situation or needs. Anyone reading this report must obtain and rely upon their own independent advice and inquiries. Investors should consider the Product Disclosure Statement (PDS) relevant to the Fund before making any decision to acquire, continue to hold or dispose of units in the Fund. You should also consult a licensed financial adviser before making an investment decision in relation to the Fund. One Managed Investment Funds Limited ACN 117 400 987 AFSL 297042, is the responsible entity of the Fund but did not prepare the information contained in this document. While OMIFL has no reason to believe that the information is inaccurate, the truth or accuracy of the information in this document cannot be warranted or guaranteed.