Volatility in 2022 made even risk parity strategies fail:…

Volatility in 2022 made even risk parity strategies fail:…

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Risk parity strategies, which aim to maximize diversification across asset classes, appear to have lost some of their appeal at a time when every asset class has suffered from ongoing global volatility.

What happened: The $1.1 billion RPAR Risk Parity ETF RPAR is down over 32% from its November 2021 high, according to Bloomberg report. This is a record loss, the report said.

The fund is down more than 28% year-to-date.

See also: Why Alibaba, Nio & Other Stocks Are Soaring in Hong Kong Today (For Now)

Based on volatility, these strategies allocate funds across all asset classes and take equal risk in each. However, the risk parity tactic failed this year as both stocks and bonds suffered from the US federal reserve‘s aggressive rate hikes in an effort to control inflation.

take experts: death sonETF Strategist Strategas securities, Bloomberg told Bloomberg that it aims to be a diversified fund, holding key asset classes: stocks/bonds/gold/TIPS, to basically “better” when volatility hits one of the asset classes.

“But we’re in this environment of still high inflation and bond yields now reaching multi-decade highs that nobody has seen in 40 years,” Sohn said.

Jeffrey GundlachChief Investment Officer of DoubleLine Capital, tweeted, “Nasdaq Total Return YTD is -30.36% and Long Maturity UST ETF is -30.94%. “Risk parity” is clearly not working so far this year.”



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