RISK Magazine

Bridgewater co-CIO on Risk Parity, Correlations and Contagion

“This year, it’s been like watching popcorn. One after another things popped,” Bridgewater co-CIO Bob Prince tells Risk.net’s Rob Mannix in this article, which cites MPI research. “The difference though is we’ve not had a contagion effect. Each event is an isolated event. Then it goes away…. That’s because, though the central banks are withdrawing liquidity, the financial system is in a very different situation from what’s typical at this stage of the cycle. Typically at this stage of the cycle the financial system is overleveraged because it’s been financing the economic expansion.” Read the full article here. (subscription required)

The risk-parity fire sale that didn’t happen

Supported by quantitative analysis and commentary from MPI Director of Research Apollon Fragkiskos, Risk.net takes a comprehensive look at risk parity funds’ behavior, finding that Q4 2016 returns suggest the strategy did not engage in a sell-off or act systematically to push market volatility up and asset prices down as some critics assumed.

Should Calpers have ditched hedge funds or allocated more?

In light of CalPERS’ termination of its hedge fund program, Risk.net editor Luke Clancy covers exclusive MPI research on the relationship between scale, selection and impact of allocations to hedge funds on the portfolio risk and return profile at pension funds. Testing a hypothetical CalPERS portfolio with allocations to hedge funds of 1%, 5% and 10%, MPI’s research finds significant positive benefits on total returns and risk-adjusted returns of hedge fund allocations at the 5% and 10% levels, though negligible impacts on the risk and return profile at the 1% level. The findings contribute to the industry debate about the role of hedge funds in defined benefit plans, including issues of scale and selection. The article appears in the November issue of Risk, as well as online in a related CalPERS story. For the full research, see MPI’s Research.

SEC Probes Retail Hedge Fund Liquidity

In a series of articles on the rise of multi-alternatives published in the May issues of Risk Magazine and Hedge Funds Review (“Hedge Funds for the Masses”), Kris Devasabai utilizes exclusive MPI’s quantitative analysis of a multi-alternatives fund (“Brilliance Bundled in Quantity”) and commentary from Michael Markov on the need for due diligence in the expanding universe of liquid alternatives offerings, a class facing regulatory review and challenges in educating investors on risk and structure.