Risk Parity Unwind----The Next Crash Catalyst

This growth-constrained scenario that Peters envisions, will create major problems for risk parity funds as the new economic environment causes stocks and bonds to plunge, creating a scenario for risk parity funds where deleveraging leads to a vicious feedback loop.....It’s essentially what the dominant portfolio has become at all the major investors, pensions, endowments, etc. in the industry. And the beauty of that portfolio has been that you’ve been able to own risk assets and then you’ve been able to own a hedge, which is a leveraged bond portfolio, and that hedge has actually paid you a positive return.

 

https://www.zerohedge.com/news/2018-02-17/eric-peters-toxic-risk-parity-funds-could-trigger-next-market-blowup

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