Risk Parity trade

Risk parity trade per BBG “is a levered-investing method to an array of assets based on their Volatility” this “type of trade was considered safe due to large exposure to bonds” not anymore .Per BBG the $948 million weatherfront Risk Parity fund lost more then 8% on Monday and again on Wednesday.” Once asset correlations increases it is bad news for Risk parity trades. More from Bloomberg the” risk parity and Vol targeting strategies oversee about $850 Billion in assets.”Take a look at Bloomberg index that shows one type of Risk parity strategy and it daily percentage change.Based on this you can see why some funds have blown up as these low volatility strategies are reporting ugly loses.

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