Cliff Asness: Risk Parity Is Even Better Than We Thought

[munger]

No, I don’t mean tactically. I like to think I’m bold, sometimes a bit too bold, but not crazy! We think both stocks and bonds are both quite expensive versus history and that this typically, though not always, leads to lower than normal long-term returns.[1] But valuation is a poor timing method. We are not writing articles, belying my title, about how risk parity[2] or for that matter traditional 60/40 investing is tactically attractive now.[3] The risk parity versus 60/40 argument has always been about strategic long?term — not tactical short?term — asset allocation (tactical arguments are fine, they just are not the point here; if you can time the stock and bond markets, you could do so whether using...