A DARM portfolio is typically made up of multiple asset classes or assets carrying various levels of risk, allowing it to adjust its sensitivity to financial markets. Its objective being to perform while maintaining its value above a protection floor, the portfolio sees its allocation vary according to its risk budget: it overweighs defensive assets as it approaches the protection floor and conversely, favors dynamic assets when its risk budget allows it.
Over the long term, the exercise of systematically constraining downward movements and encouraging upward movements improves the distribution of returns and helps the portfolio secure higher levels.