Taking advantage of risk parity strategies’ benefits doesn’t mean having to load up on leverage. Torsten von Bartenwerffer, portfolio manager at Aquila Capital, talks about where a risk parity bond fund could fit into your portfolio.
aiCIO: Aquila’s multi-asset risk parity strategy first launched in 2004. Why did you decide to extend the range with a strategy that applies the concept to just one asset class—fixed income?
Bartenwerffer: There are several reasons. Let us say you’re a fixedincome investor who has invested for the last 30 years and witnessed the Great Moderation coming out of the 1980s. Central banks started to micromanage interest rates. That led to a smooth business cycle where we had calm waters, enabled globalization, and basically worked as a hugely successful machine. Whenever the economy struggled, the central bank simply lowered interest rates, greasing the economy with cheap money.