Читать книгу Alternative Investments - Black Keith H. - Страница 54

Market participants have set forth other arguments in support of the risk parity approach, such as that it has performed well in the past, that it produces well-balanced portfolios, or that the resulting portfolios are well diversified in terms of risk. These arguments can be rejected. First, it is clear that going forward, low-risk fixed-income instruments of developed and most emerging economies will not perform as well as they did during the past 20 years, as many bonds now have yields far below the historical returns in their respective markets. Therefore, risk parity portfolios that overweight fixed income are unlikely to repeat their historical performance.

Second, the argument that the portfolios will be well balanced is imprecise and appears to belong to marketing materials rather than an economically sound investment report. It is unclear what is meant by “well balanced” and why it should lead to superior risk-adjusted performance.

Third, it is important to note that risk parity may introduce risks that are absent in other strategies. The fact that risk parity portfolios require investors to use leverage may indicate that they are not directly comparable to equally volatile portfolios that do not use leverage. Funding liquidity risk, which was discussed earlier in this chapter, introduces a risk associated with leverage that is not present in unlevered portfolios. For example, during periods of market stress, the investor may be asked to reduce the portfolio's leverage and therefore liquidate the portfolio at the most inopportune time.

A fourth unsupported rationale for risk parity is that it can exploit anomalies that exist in alternative asset markets. However, there have been no studies to show that the low volatility or betting against beta anomalies work in the alternative investment area. That is, the low-risk strategies may or may not provide the highest risk-adjusted returns. While there is some evidence that levered low-risk portfolios of traditional asset classes may provide attractive risk-adjusted returns, there is no evidence that such a strategy could work in the alternative investment area. Compared to portfolios of liquid traditional assets, funding of levered portfolios of alternative investments is likely to be more difficult and more expensive.

It is important to note that because some alternative investments have low volatility and low correlations with other asset classes, the allocations to alternative investments using the risk parity approach will be relatively high compared to market weights and typical institutional portfolios. Exhibit 2.5 is an example of how risk parity may lead to unusually high allocations to low-risk investments, including alternatives. There is an equally high allocation to the HFRI index in the minimum volatility portfolio. As previously stated, risk parity relies on leverage aversion and low volatility anomalies to justify increased allocations to low-risk assets. However, using leverage to increase the return on a low volatility portfolio that contains significant allocations to alternative assets may not be possible or desirable.

While risk parity may be a viable approach to asset allocation, it does not represent a trading strategy that can be employed by active managers seeking to maximize risk-adjusted return, because risk parity does not require or use any estimate of expected return. The risk parity approach may be suitable for institutional and high-net-worth investors who do not face substantial constraints on their asset allocation policies and who are able to use leverage to adjust the total risk to meet their target total risk.