DARM (Dynamic Asset & Risk Management) fits the general willingness of investors to obtain absolute returns, and it can meet the requirements of capital preservation.
The portfolio is divided into a protective “Core” and a “Satellite” which captures the performance. The model dynamically allocates capital between the Core and the Satellite, given the risk budget which is available and a multiplier m. This structure can be overlapped with other Core/Satellite structures in order to take into account sub asset-classes.
DALM (Dynamic Asset & Liability Management) is an extension of the DARM solution which allows to take into account the liabilities of the investor and therefore to protect for instances the funding ratio, to control its volatility and minimize required contributions.
The portfolio is divided into a Liability-Hedging Portfolio (LHP) and a Performance-Seeking Portfolio (PSP), organized like a DARM. This time, the model allocates capital between the two portfolios given the constraints on the funding ratio.