No Quant Is Safe as Global Stress Hits Risk Parity Where It Hurts
- Diversification method challenged as vol rose to 2-year high
- Risk-parity managers fret investors to chase returns elsewhere
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Choppy markets around the world are hurting one of Wall Street’s hottest quantitative trades, belying its status as a port in the storm.
The commodity train wreck, emerging-market turmoil and shifts in government bonds have created a wave of turbulence for risk-parity funds, a strategy first popularized by Ray Dalio that weighs exposures according to volatility measures.