I saw a mention of Constant Proportion as an investment strategy on the Vanguard forum (link1). To be honest, I had never heard of it, and never met anyone that said they used it. It still isn't all that clear in my mind, but this lengthy PDF paper written by Perold and Sharpe at link2 has more on it, starting on page 6, along with profit/loss graphs. Some other references that I haven't linked refer to using derivatives to implement CPPI.
To cut to the short and sweet: CPPI buys on strength, sells on weakness. It tends to do well in strong bull markets, not so good in flat range bound markets, and offers downside protection in severe bear markets. The much more popular constant mix strategy of rebalancing will do better in a flat market, not as well in a strong bull or strong bear market. Rebalancing also fails if assets approach near zero value in a melt down scenario (think Germany or Japan in 1944/1945 or CSA bonds and currency in 1864/1865). Even in a milder downturn like Japan 1990 until 2011, CPPI would have done better than the constant mix.
Some other very popular strategies are buy-and-hold, which is self explanatory, and dollar-cost-averaging, which is buying a set dollar amount every week or every month. I am a fan of DCA, even though there are studies that show it isn't the best way to invest. The main reason is that it smooths out the emotions. It is difficult for most folks to go from 0% invested to 100% invested. The daily swings are too much for most to take, and they will bail on their plan. DCA is easier on the emotions, so most folks are more likely to stick to the plan.
Well I learned something new, though I don't have an in depth understanding of it.
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