Aquila launches risk parity fund for bonds

Risk3Hamburg-based Aquila Capital has launched what it says is the first risk parity fund to invest solely in fixed income.

The AC - Risk Parity Bond Fund aims to allocate risk evenly between government bonds, corporate bonds, carry positions in emerging markets and inflation-linked bonds. The fund aims for a return of cash plus 3% with annualised volatility of about 3%.

Risk parity funds have emerged as a promising way to reduce volatility and limit drawdown in difficult markets. Aquila Capital's AC Risk Parity strategy, which includes three funds, has been running since 2004 and generated positive returns in 2008.

The new fund is a Luxembourg Sicav with a minimum investment of €50,000.

“Capital is allocated based on the risk an asset contributes to the portfolio rather than predicted returns and market timing plays no role at all,” says Torsten von Bartenwerffer, senior portfolio manager at Aquila Capital.

“Instead, the strategy focuses on managing uncertainty through effective diversification between assets that have no correlation to each other and which have various correlations to different phases of the economic and fixed income cycles.”

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