New York (HedgeCo.Net) – As the first strategy of its kind in the market, $5.3 billion EU-based hedge fund, Aquila Capital, intends to launch a Risk Parity Bond strategy. It is designed to provide fixed income investors with a diversified and liquid counterbalance to their existing exposures, which may be perceived as vulnerable should fixed income markets reverse.
Aquila Capital’s Risk Parity Bond strategy will invest with equal risk weightings across four types of fixed income asset. Each is uncorrelated to the others. They are Government Bonds, Corporate Bonds, Carry Positions in Emerging Markets and Inflation-linked Bonds.
The correlations of each of these asset types to different phases of the economic and fixed income cycles are also highly varied. This means that as one asset type goes down, one or more of the others should rise. This helps to mitigate risks and stabilize returns across the portfolio on a sustainable basis.
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