Hedge Fund Research Debuts Family Of Six Risk-Parity Indexes

Aug 17 2017 | 9:43pm ET

Hedge Fund Research, a leading provider of indexes, data and analytics for the hedge fund industry, has launched a new family of risk-parity metrics aimed at institutional investors and managers seeking comprehensive and robust performance benchmarks for the popular market segment. 

The new indices are believed to be the first of their kind, HFR said in a statement Thursday. 

Risk parity is a portfolio allocation strategy based on targeting risk levels across various components of an investment portfolio. The approach allows investors to target specific levels of risk, and to divide that risk equally across their portfolio in order to achieve optimal diversification and stronger performance. The prime objective of such strategies is to deliver the same level of performance as traditional asset allocation strategies, but with less volatility and risk. Risk parity-themed products have gained significant popularity among U.S. and international financial institutions and investors in recent years.  

HFR’s six new risk-parity indexes include two important specialized features integral to benchmarking risk parity products: volatility targets and institutional asset levels. There are three annual volatility targets in the series – 10%, 12% and 15% - and each level contains two indexes, one for all qualifying risk parity vehicles and one for those with more than $500 million in AUM. In total, there are 25 risk parity funds represented in the index family, managing an aggregate of $110 billion in strategy capital. 

The indexes will be rebalanced annually and are investable through HFR Asset Management, the company said. 

"HFR is pleased to launch the new family of Risk Parity Indices, which have been developed in close conjunction with the underlying managers and an ongoing collaborative effort with institutional investors,” said Ken Heinz, president of HFR, in the statement. “HFR has successfully achieved the goal of providing a robust and flexible benchmark for investors in the Risk Parity space.”

The new benchmarks will be updated three times a month: Flash Update (5th business day of the month), Mid Update (15th of the month - or nearest business day), and End Update (1st business day of following month), HFR said. 

Established in 1992, HFR is a global leader in specializing in the indexation and analysis of hedge funds. The company produces the HFRI, HFRX, HFRU, and now Risk Parity, Indices, all of which are industry benchmarks for global hedge fund performance. In total, the company calculates more than 100 indices ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.

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