As markets continue to remain skeptical of a 2016 rate hike, a Bank of America Merrill Lynch volatility research report notes that latent risk in risk parity strategies is “worth monitoring” across markets. Last week’s sharp sell-off in Japanese bonds stoked fears among investors that forced selling by risk parity funds might spread in an ever more globally interconnected world. [dalio] Certain risk parity funds are leveraged to the maximum level, which should be cause for monitoring Ultimately last week risk parity funds ended up not deleveraging. While the Japanese interest rate market sold off, US Treasuries did not and…
Risk Parity Deleveraging “Worth Monitoring” Across Markets: BAML
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.
Comments are closed.