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Ibbotson Exec, Scholar Patent Allocation Model

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A unit of Morningstar Inc. has received intellectual rights protection for a technique for helping retirees guard against the risk of living longer than they had expected.

Peng Chen, the president of Morningstar’s Ibbotson Associates unit, and Moshe Milevsky, an associate professor at York University, have received Patent Number 7,120,01 from the U.S. Patent Office for their system for optimizing asset and product allocations for retirees, according to Morningstar, Chicago.

The patent, which is assigned to Ibbotson Associates, covers a method for using a combination of bonds, stocks, and fixed and variable annuities to manage assets in a way that reflects a retiree’s spending needs, bequest preference and tolerance for longevity risk, Morningstar says.

The new model is an alternative to the popular Markowitz mean-variance optimization model, which incorporates assumptions about risks and returns but does not explicitly incorporate longevity risk, Morningstar says.

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