Tag Archives: volatility

Does Risk Parity Maximize Risk-adjusted Returns?

While it is well known that risk parity strategies typically allocate more weight or apply leverage to asset classes with lower risk, it is not well understood how higher volatility affects the Sharpe ratios exhibited by the assets that get over- or under- weighted.  We find that in practice the strategy increases an asset’s weight […]

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Is there more liquidity danger in High Yield Bond Funds? Check with Durbin-Watson.

In the winter of 2015, an almost unheard of situation happened. A mutual fund, normally required to guarantee daily liquidity, blocked its clients from withdrawing money. The Third Ave Focused Credit Fund (TFCIX), citing losses and a lack of liquidity in the high yield bond market, put some of its assets into a trust to […]

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Like That 40% Return? Better Understand Risks First.

A July 20th WSJ article featured Quantedge Capital, a quantitative global macro hedge fund manager that gained 40% after fees year-to-date through June. The fund’s 2016 performance is outstanding indeed, as compared with major asset classes in the chart below (here and below we use the fund’s performance data from Eurekahedge):  According to the investor […]

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How Much Equity is in Your Target Date Fund (TDF)? Brexit Might Have the Answer.

Target Date Funds stumbled hard in 2008 when near-dated funds failed to provide the capital protection they were meant to for investors approaching retirement.  ‘Brexit’ may not be a Lehman Brothers-scale event, but it can certainly serve notice of some of the risks currently being assumed in near-dated Target Date Funds.  Below we illustrate how […]

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Risk Parity and Brexit: A Volatility Surprise!

Risk parity strategies hold the promise of smooth sailing through periods of market turbulence, offering consistent performance via risk diversification. And prior to Brexit, risk parity funds had done quite well to reverse most of last year’s losses, displaying similar performance patterns despite the difference in strategy implementation or exposure and dynamics as reported by […]

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Examining the Core: Intermediate-Term Bond Funds in August

The month of August was almost universally tough for financial markets. Equity, Commodity and Fixed income markets fell, dragging most managers with them. Intermediate-Term Bond Funds, one of Morningstar’s largest categories, were not immune to this turmoil, with 221 of 235 funds posting losses. The median loss for the category was -0.25%, with the Barclays US. Aggregate Bond […]

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Crisis in the Rearview Mirror: Monitoring Mutual Funds in the Five Year Window

March marked the first month that the impact of extreme down markets of the Financial Crisis faded out of 5 year fund performance histories. With the darkest days of 2008 and Q1 2009 removed from 5 year track records and associated risk measures, significant shake-ups are being felt in many DC fund “scorecards”, investment policy […]

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When Measuring the Value of Hedge Funds, Don’t Forget Risk

Following the financial media’s reporting on hedge funds over the past few years, one could be mistaken for thinking that frustrating industry-wide returns – along with some high profile winning bets, frauds and serial insider trading – have dominated the industry. And yet money, particularly of the institutional variety, continues to flow towards these expensive […]

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Equity Emerging Markets Global

Equity Emerging Markets Global funds’ performances range from -43.56% to 7.49% over the last 52 weeks (ending October 28, 2011), in EUR terms. On average, the best 5% of the funds outperform the market (pegged to the MSCI Emerging Markets Index) by approximately 7.95% and the worst 5% underperform by approximately 14.04%. We last analyzed […]

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