Risk Parity

Risk Parity in the Time of COVID

Consistent with misapprehensions expressed during other recent market crises, there has been a chorus of alarmist speculation about the actions and state of risk-parity strategies during the current crash. We felt it would be helpful to revisit the concept of risk parity and take a snapshot of how a typical global risk parity strategy might have been expected to behave this year.

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Portfolio Optimization: Simple versus Optimal Methods

Our whitepaper “The Optimization Machine: A General Framework for Portfolio Choice” presented a logical framework for thinking about portfolio optimization given specific assumptions regarding expected relationships between risk and return. We explored the fundamental roots of common portfolio …

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ReSolve Buffett Bet Portfolio Based on Risk Parity and Factors

In 2008 Warren Buffett proposed a public bet that actively managed investment products, plagued by high fees, would not live up to the goal of beating a passive investment in the Vanguard S&P 500 ETF over the subsequent decade. Only one person had the intellectual conviction to represent the …

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Risk Parity and The Four Faces of Risk

The goal of this article is to summarize the complex dynamics that drive asset returns. You’ll discover that asset returns are impacted by four sources of risk. Two of these risks affect all assets in the same way, and therefore are undiversifiable. The other two risks …

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Risk Parity isn’t the Problem, it’s the Solution

Bank of America Merrill Lynch recently released a research note suggesting that Risk Parity investment strategies currently represent a substantial source of systematic risk in global markets.  The note was picked up breathlessly by several media outlets and posted under …

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Do You Spinu? A Novel Equal Risk Contribution Method for Risk Parity

Risk Parity seems to have (temporarily?) lost its place near the top of the institutional asset allocation wish list, no doubt because it proved vulnerable to policy shocks during last year’s central bank equivocation. Nevertheless we continue to believe the concept is valuable if thoughtfully applied.

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About Us

ReSolve Asset Management Blog is an investment research forum, opinion pieces, and educational material from the team at ReSolve Asset Management. Our views are driven by evidence based finance, with a special focus on asset allocation, factors and smart beta, retirement and endowment strategies, and quantitative methods.

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