Cristina Brizido is head of Investments at Caixagest in Lisbon, and a member of InvestmentEurope’s Editorial Board.
In September 2016 she commented on the following question:
Q. We have seen wide divergence betweeen alternative strategies, especially a clear trend in favour of risk parity over global macro strategies. Do you expect this to continue or revert?
A. Alternative strategies have been under intense scrutiny after a lacklustre 2015 and a modest year-to-date performance. Q2 performance has been stronger and many investors will be hoping that this continues. In this context, risk parity strategies have attracted investors attention. The rational is that by equally distributing risks among assert classes, the portfolio can weather huge price swings without sacrificing returns.
Because a risk parity portfolio focus is on taking a similar amount of risk in each asset class, it typically allocates more to a fixed income than a traditional 60/40 portfolio. Therefore, this strategy has greately benefited in 2016 from the outperformance seen on global fixed income markets. Such allocations to fixed income may face some challenges should markets prove wrong on their sceptical opinion regarding a 2016 Fed hike.
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