Sun, Mar 29, 2015
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   |   
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. Other Voices: Does the hedge fund industry benefit society?[more]

    This article was authored by Don Steinbrugge, Chairman of Agecroft Partners, a US-based global consulting and third party marketing firm for hedge funds. It is no secret that the hedge fund industry is viewed negatively by a la

  2. Private credit comes into focus for investors[more]

    Bailey McCann, Opalesque New York: As investors look for a way out of the low yield/no yield environment, private credit is becoming an increasingly attractive asset class, according to a white paper from Bayshore Capital Advisors. Private credit has grown steadily since the financial crisis as

  3. Other Voices: The role of diversification in CTA portfolios[more]

    2014 brought a resurgence of managed futures strategies, or CTAs, which performed very well as a whole, outperforming all other hedge fund strategies. However, a closer look reveals that there was a wide range of performance, or return dispersion, across managers. The bottom line? Not all CTAs

  4. Neuberger Berman unit buys 20% stake in activist hedge fund Jana Partners for $2bn[more]

    Komfie Manalo, Opalesque Asia: Neuberger Berman’s unit Dyal Capital Partners bought a 20% stake in activist hedge fund firm Jana Partners worth $2bn, WSJ.com reports. The deal comes as activi

  5. Hedge fund launches fall again, $1bn funds found to outperform even smaller hedge funds[more]

    Komfie Manalo, Opalesque Asia: The number of new hedge fund launches fell again in 2014, the third consecutive year of decline, while fund liquidations saw their first drop since 2010, according to the latest HFR Market Microstructure Industry Report released by industry data provider HFR. Acc

 

banner