AQR, who has been pretty innovative in launching a number of what I would call alternative beta funds, just launched a risk parity fund – AQRNX, AQRIX. (HT:AP) We’ve been writing about the topic of risk parity on the blog since 2006 and I’ll include some background links below. I asked the q a long time ago why someone didn’t launch an all weather type of globally diversified fund (although they should only charge about 20-50 bps tops vs 1.25% which seems high for a buy and hold strategy).
Fact Sheet here
Homepage here
A couple other views on risk parity below:
I Want to Break Free – James Montier
The Hidden Risks of Risk Parity Portfolios – Ben Inker GMO
Engineering Targeted Returns and Risks – Bwater
The Biggest Mistake In Investing – Bwater
Risk Parity Portfolios – PanAgora
Risk Parity PPT– PanAgora
The King of Quants
GTAA Q2
Risk Parity Q3
Risk Parity Q2
And an article from Quantext, “Getting the Most Return for Your Risk“.
I wholeheartedly agree with the author that a good buy and hold asset allocation can get you to about a 1:1 ratio for return to volatility. With a few tweaks (like risk parity) you can do slightly better, but not a lot better without resorting to active management.
