Wealthfront has launched Risk Parity, the latest addition to PassivePlus, the company’s signature suite of investment features, which is designed to replicate Bridgewater Associates’ All Weather Fund.
PassivePlus represents Wealthfront’s collection of academically proven, time tested rules-based strategies that seek to increase clients’ net of fee, after-tax returns, while maintaining their same level of risk. Risk Parity joins Wealthfront’s previous PassivePlus features, daily tax-loss harvesting, stock-level tax-loss harvesting and Smart Beta as impactful capabilities.
“Wealthfront’s PassivePlus marries decades of academic insights with technology to deliver a disciplined investment approach that helps our clients achieve their financial goals,” says Dr Jakub Jurek, Wealthfront’s Vice President of Research. “Our launch of Risk Parity demonstrates that even the most sophisticated strategies can be deployed via software in a cost-effective manner.”
Bridgewater Associates built the world’s largest hedge fund, aided by its creation of the risk parity strategy in its All Weather Fund, which launched in 1996. The strategy gained momentum based on its strong relative performance during the 2008 financial crisis. But the firm’s account minimum of USD100 million limited the availability of its risk parity strategy to the ultra-wealthy and institutional investors. True to form, Wealthfront’s PhDs and engineers developed a software-based approach designed to replicate Bridgewater’s risk parity strategy, while keeping costs to the investor as low as possible.
“Most academics appreciate the benefits that broad diversification can bring, yet time and time again most investors fail to take advantage of the full benefit,” says Dr Burton Malkiel, Wealthfront’s Chief Investment Officer and renowned economist. “The addition of Risk Parity takes diversification to the next level with a cost-effective, rules-based strategy. It aims to offer our clients more consistent returns during uncertain economic times. I am proud we’ve been able to offer it at a low cost to our clients.”