Indexing Risk Parity Strategies

Posted on 01/11/2021

This article is sponsored by S&P Dow Jones Indices.

Since the launch of the first risk parity fund, Bridgewater’s All Weather Fund in 1996, many asset managers have offered their version of risk parity to clients. In the past, such strategies lacked an appropriate benchmark, leaving most investors to benchmark against a traditional 60/40 equity/bond portfolio. The problem with this approach is that a 60/40 portfolio reflects neither the construction nor the risk/return characteristics of risk parity strategies.

The S&P Risk Parity Index Series provides a transparent, rules-based benchmark for equal-risk-weighted parity strategies. These indices construct risk parity portfolios by using futures to represent multiple asset classes and the risk/return characteristics of funds offered in the risk parity space. Learn more about the economic rationale for implementing a risk parity approach in a multi-asset portfolio construction and how indices may play a role in that implementation.

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