CPPI$^{\dagger}$ is a risk management tactic that can be applied to any investment portfolio. The approach entails banking a percentage of profits whenever a new all time high wealth is achieved, thereby ensuring that a portfolio’s drawdown never goes below some maximum percentage. Here, I review CPPI and then consider the mean growth rate of a CPPI portfolio. I find that in a certain, common limit, this mean growth is given by a universal formula, (\ref{cppi_asymptotic_growth}) below. This universal result does not depend in detail on the statistics of the investment in question, but instead only on its mean return and standard deviation. I illustrate the formula’s accuracy with a simulation in python.
$\dagger$ CPPI = “Constant Proportion Portfolio Insurance”