Last week JPMorgan Chase & Co. warned its clients that Volatility Target strategies, CTAs and Risk Parity portfolios could sell a combined total of $150 billion to $300 billion of equities during the next few weeks as momentum drives selling (Concerns Over Risk Parity Grow [Cont.])
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The report from JPMorgan came a few days after the Financial Times published an article on the risks that Risk Parity strategies posed to the global bond market. The Financial Times cited a new report from AllianceBernstein (Introduction to Tail Risk Parity an old copy of the paper can be found here), which estimates that risk parity is now a $400 billion industry. Assuming an average leverage ratio of 355%, these funds control around $1.4...
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