The common drivers behind alt risk premia’s difficult year

Statistical analysis shows four strategies caused most pain, but funds suffered differently

Those who were waiting for the alternative risk premia (ARP) sector to face its first real test got their wish in 2018.

The year was disappointing for the main indexes of both bank products and funds, with performance below the risk-free rate¹ in eight months out of 12 and an average Sharpe ratio of –1.2 (see figure 1).

What happened? Here we dig into the data to understand which strategies drove losses industry-wide and to look at how individual funds were exposed.

The results show that