ReSolve explains how risk parity portfolios aim to balance risk exposure across asset classes rather than capital allocation alone. The paper argues traditional 60/40 portfolios can leave investors heavily dependent on equities, while diversified risk balanced allocations may better navigate inflation shocks, recessions, and regimes.
Global Risk Parity
Resolve Asset Management
Research
16 Pages
Key Takeaways
Equity Risk Concentration: A 50/50 stock bond portfolio still derives roughly 90% of total portfolio risk from equities, exposing investors to concentrated macro sensitivity.
Inflation Regime Vulnerability: During 1970 to 1980, both the S&P 500 and 10 year Treasuries produced negative real returns as inflation and stagnating growth pressured traditional allocations.
Dynamic Risk Balancing: ReSolve formed allocations using 5 year asset volatility and correlation data, giving lower volatility bonds larger capital weights while maintaining equalized portfolio risk contributions.
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