Concerns Over Risk Parity Grow

The growing popularity of risk parity funds is causing alarm with some analysts and rival fund managers concerned by the potential dangers they pose.

This concern also comes as investors pulled over $28bn from bond funds in the five weeks to July 9, the longest streak of outflows from government bonds since 2013. As a result, some have begun to speculate that that “bond supercycle” is coming to an end, although this is an argument that has been heard many times before.

That said, this time around things are different. Analysts have noted that risk parity strategies look particularly vulnerable given the lack liquidity and a number of dealers committed to making two-way markets.

[dalio]

Bridgewater: Risk parity risk

Bridgewater's $80...