Читать книгу Risk Parity - Alex Shahidi - Страница 24

There is one additional form of risk that is worth mentioning: peer risk. The three dimensions of risk (volatility, material loss, and an extended period of poor returns) are absolute in nature. Because of the two steps taken, (1) select diverse asset classes, and (2) structure asset classes to have equity‐like returns, the absolute risk is manageable. However, the bigger risk of adopting a risk parity approach is underperformance relative to the conventional mix. In other words, if the reference point is how the strategy is doing relative to how others are invested, then the risk of underperformance can be meaningful. After all, there is always the potential of falling behind by investing differently from others. This is sometimes called peer group risk in institutional investing and also holds true for individuals who compare themselves to peers and how the market is performing. I mention this because I have been using this investment approach for decades and have observed that one of the greatest challenges in holding on is living through periods of relative underperformance.