Category: Risk Parity
Risk Parity – When volatility goes up across asset classes, the result is painful. But perhaps not as bad as some alternatives.
| |Risk parity has had good performance over the last two years with double digit returns after stumbling in 2015, yet the diversification strategy of equal weighting of four major asset classes has been painful this year. Diversification based on weighting risks offers some protection but is not cure for a volatility revaluation … Read more Risk Parity – When volatility goes up across asset classes, the result is painful. But perhaps not as bad as some alternatives.
| |The 60/40 stock/bond blends both domestic and international generated double-digit returns on strong equity performance. The majority of the risk came from the stock allocation which make them sensitive to any market reversal … Read more Risk Parity Shows Good Performance – Diversification Plus Volatility Weighting
Risk Parity With Strong Performance, Yet Global Macro – Managed Futures May Be a Better Choice to Offset Mispricing Risk
| |The positive performance of risk parity products has been sneaking up on clients after poor returns in 2015. This long-only product have done much better than many other multi-asset hedge fund strategies in the last year with the HFR 12% vol institutional index being up 9.46% through September; however, it has been riding the wave of asset price mispricing or overvaluation … Read more Risk Parity With Strong Performance, Yet Global Macro – Managed Futures May Be a Better Choice to Offset Mispricing Risk
| |Risk parity has been one of the most important advancements in portfolio construction over the last decade. It places the focus on equalization of risk and not on comparing expected returns which are notorious for being difficult to forecast. However, there is a problem with risk parity. It will allocate more to low risk asset classes that may be subject to a downturn. There is no opinion on market direction or valuation. It assumes the investor has no information on individual assets or view of factor risks. Outperformance relative to cap weighted portfolio is related to whether low risk assets have returns than higher risk assets … Read more Risk Parity