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AQR Capital Management launches Risk Parity mutual funds


AQR Capital Management has introduced two mutual funds, AQR Risk Parity II MV Fund and AQR Risk Parity II HV Fund, which will be distributed through financial advisers only.

AQR’s objective with these new mutual funds is to produce attractive risk-adjusted returns while diversifying investors’ exposure to equity risk.

The potential investment benefit of risk-parity funds is that they may provide financial advisers with additional investment choices designed to further diversify and help to create more efficient portfolios.

“We want to broaden investors’ menus by offering a variety of risk exposures that match their risk profile,” says David G Kabiller, co-founding partner and head of client strategies at AQR. “These funds can help advisers better target their particular risk preference: higher risk and higher potential returns or moderate risk and more moderate returns.”

Risk parity funds seek to produce attractive risk-adjusted returns by investing in a globally diversified portfolio of equities, fixed income and commodities. Broadly defined, risk-parity funds balance risks rather than asset classes. A typical risk-parity portfolio begins with less exposure to equities relative to traditional portfolios and invests more in other asset classes. As a result, its risk budget is not concentrated in equities, but spread more evenly across other assets.

In addition, the new funds offer different levels of target volatility to suit the risk preference of different investors. The AQR Risk Parity II MV Fund targets a moderate annualised level of volatility, 10 per cent, while the AQR Risk Parity II HV Fund aims for a higher target annualized level of volatility, 15 per cent.

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