- Introduction & Methodology
- Industry Trends
- Vendor Ratings
- Bridgewater Associates (All Weather)
- AQR (Risk Parity)
- BlackRock (Market Advantage Fund)
- PanAgora (Risk Parity Multi Asset)
Past Surveys
Risk parity is enjoying a performance rebound after a tumultuous year. But is allocator sentiment rallying as well?
2015 was a cruel one for risk parity. Thanks to poor-performing equities, a slump in bond yields, and equally shoddy commodities, the once-hottest strategy in institutional investing became a bad word. To make matters worse, many claimed risk parity funds’ active rebalancing between asset classes contributed to the August crash in stock markets. “This has been a long and painful relative period for risk parity,” AQR Founder Cliff Asness argued in December. “But it has not been one that’s historically unprecedented or even unusual.”
While the first two months of 2016 proved equally turbulent for risk parity, a bond rally and recovering commodity prices in the following months helped turn the strategy’s performance around. Investor sentiment about risk parity, however, may take some more time to bounce back.
Of those respondents already investing in risk parity—102 qualified in this year’s survey—only 16% said they would increase their risk parity allocation for the next 12 months, down from 19% last year. But 72% said they would maintain their current allocations, compared to 66% in 2015.
Investors allocating more than 25% of their portfolios to risk parity also decreased to 7% from 11% last year. Specifically, only 8% of funds with more than $5 billion in assets and 7% of funds with less than $5 billion said they invested more than a quarter of their portfolios in risk parity (down from 18% and 10% respectively in 2015).
However, allocators were happier with their risk parity providers this year, with the greatest satisfaction level increase in transparency for portfolio holdings (4 out of 5, compared to 3.44 in 2015). Investors were also increasingly pleased with providers’ overall offerings, which scored 4.4 out of 5 versus 4.03 last year.
Methodology
Chief Investment Officer’s 2016 Risk Parity Investment Survey was conducted
from August 18 until September 13, 2016, and asked defined benefit
and defined contribution corporate and public pensions, endowments,
foundations, insurance funds, health care organizations, and sovereign
funds about their practices and views on risk parity investment strategies
and vendors. Of all responses, 102 qualified by being from (a) a senior
investment official at (b) a qualified fund. Duplicate responses from the
same fund were counted as only one response. All percentages in the survey
charts are rounded to the nearest percent. Percentage change figures are
calculated on the actual unrounded results. For more information, contact surveys@strategic-i.com.