Risk-Parity Trade Is Ready for Rebound as ‘Teflon’ Stocks Ignore Trouble, AQR Says
- Quant firm upbeat on outlook for strategy rocked by inflation
- Threat of recession, bonds hedging stocks again bode well
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One year after the inflation shock wreaked havoc for diversification strategies on Wall Street, AQR Capital Management sees brighter days ahead for a popular quant trade that spreads money across assets.
According to the Greenwich, Connecticut-based systematic manager, so-called risk parity investing — which allocates to everything from stocks and debt to commodities based on their volatility — is ready for a revival as bonds re-establish their traditional role as a portfolio diversifier.