Wed, Apr 16, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Aquila launches Risk Parity Bond strategy as antidote to current fixed income uncertainties

Tuesday, February 19, 2013
Opalesque Industry Update - At a time when the outlook for fixed income is so uncertain, Aquila Capital intends to launch a Risk Parity Bond strategy. This is the first strategy of its kind in the market. It is designed to provide fixed income investors with a truly diversified and liquid counterbalance to their existing exposures, which may be perceived as vulnerable should fixed income markets reverse. The objective is to offer investors long term stable returns regardless of the twists and turns in the economic and fixed income cycles.

The strategy blends the diverse characteristics of the uncorrelated asset types within the fixed income universe from which sustainable risk premia can be extracted. This systematic strategy applies the same well proven Risk Parity allocation principles as Aquila Capital’s long established and successful multi-asset AC Risk Parity strategy (including the AC Risk Parity 7, AC Risk Parity 12 and AC Risk Parity 17 Funds), which has delivered strong risk-adjusted returns since 2004, including positive performance in 2008.

Aquila Capital’s Risk Parity Bond strategy will invest with equal risk weightings across four types of fixed income asset. Each is uncorrelated to the others. They are Government Bonds, Corporate Bonds, Carry Positions in Emerging Markets and Inflation-linked Bonds. The correlations of each of these asset types to different phases of the economic and fixed income cycles are also highly varied. This means that as one asset type goes down, one or more of the others should rise. This helps to mitigate risks and stabilise returns across the portfolio on a sustainable basis.

Torsten von Bartenwerffer, Director of Portfolio Management at Aquila Capital says: “Aquila’s new Risk Parity Bond strategy is a world first. It uses the same diversification and risk equalisation principles as our multi asset Risk Parity funds. Capital is allocated on the basis of the risk which an asset contributes to the portfolio rather than its predicted returns. The strategy is not based on market timing, but instead focuses on the management of uncertainty through effective diversification.”

Stuart MacDonald, Managing Director at Aquila Capital concludes: “Aquila’s Risk Parity Bond strategy provides an effective antidote to the current uncertainties faced by so many institutional and other investors who need to maintain fixed income exposures in their portfolios. Many market commentators see a “great rotation” from bonds to equities, driven by economic recovery, rising interest rates and a pursuit of higher returns. This is seen as likely to end the 33-year bull market in bonds. Since c.50 percent on a risk weighted basis of the Risk Parity Bond portfolio is correlated to equities, the strategy should perform in this scenario. Since the other half of the risk within the portfolio is allocated to core fixed income markets, if they remain steady or rise, then the strategy will also benefit. Risk Parity offers truly effective risk-equalised diversification across uncorrelated asset classes from which risk premia can be extracted, which means that we should be able to offer sustainable long term performance, regardless of economic and market conditions.”

Press release

Aquila Capital is one of Europe’s leading independent Alternative Investment managers with over USD 5.3billion in assets under management. The company specialises in the management of market independent investment strategies that are driven by global macro trends and which provide above average, long term returns. www.aquila-capital.com

Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Banner
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  2. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  3. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo

  4. Opalesque Exclusive: Pensions, endowments, family offices reconsider life settlement investments[more]

    Bailey McCann, Opalesque New York: Hedge funds were once the largest investors in the life settlement industry, now the industry is seeing more interest from pensions, endowments and family offices directly. Life settlements have always been considered a niche part of the investing landscape, an

  5. SEC allows investment funds to use social media[more]

    Bailey McCann, Opalesque New York: The Securities and Exchange Commission (SEC) has released new guidance letting investment funds and advisors use social media to promote client reviews. The guidance seeks to assist investment managers in developing compliance policies and procedures reasonably