Keep risk parity simple, stupid

In times of volatility, simpler risk parity strategies may outperform more elaborate counterparts

“Keep it simple, stupid” – the military mantra that says all kit should be simple enough to be fixable mid-combat – could be a watchword for investment managers trying to balance the risk in their asset classes.

What risk parity managers have observed in the post-pandemic era is that unnecessary complexity in such strategies can be counterproductive.

Many have come to believe that more tactical versions of a risk parity strategy – those that aim to react quickly to market conditions – might be