Thu, 24/01/2013 - 06:08
Salient Partners, a USD17.4bn asset management firm, has completed the launch of the Salient Risk Parity Fund.
The fund seeks to generate long-term capital appreciation by using risk parity, a global allocation and risk management strategy whereby risk is distributed equally across a broad set of asset classes within a portfolio while targeting a specific level of volatility, allowing dollar levels to adjust accordingly.
Under the risk parity framework, the fund seeks to keep volatility levels constant throughout all market conditions. In addition, asset classes are linked to major market drivers (growth, sentiment, inflation and deflation) while maintaining low correlations to each other.
"The erratic performance of the equity markets in recent years has brought home to investors the need to find an alternative to traditional asset allocation strategies," says Lee Partridge, Salient chief investment officer, who serves as the fund's portfolio manager along with Roberto M Croce, Salient director of quantitative research. "The Salient Risk Parity Fund seeks to allow investors to create a truly efficient portfolio by more accurately reflecting the levels of volatility and correlation among asset classes, and in particular by reducing the dominance of equities within the investing portfolio."
The fund primarily invests in futures contracts and other financial instruments with exposure to global equity markets, global interest rates markets (related to government bond markets of developed nations) and global commodities markets. It targets a 15-per cent volatility level spread equally across equities, commodities, interest rates and momentum (the continuation of recent price trends).
"By offering the risk parity strategy in a mutual fund, Salient is giving a greater number of investors the opportunity to potentially achieve efficient diversification without overly relying on factors such as equity risk or emotional weights," says Partridge. "This innovative strategy seeks to eliminate the inefficiencies of more traditional asset allocations, giving investors more control over their risk level and providing an allocation alternative to equity concentration."
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