From ai5000 Magazine: Risk Parity, or Just Risky?

The consensus: The rise of derivatives and, more recently, extreme equity volatility have driven many asset owners into the arms of risk parity vendors. The debate: Is this a good thing?

Lee Partridge’s immediate concern is a cumbersome investment structure and an inability to alter it. His enduring concern is likely to be both more esoteric and grave: asset class corrections.

Partridge, via a somewhat convoluted structure of outsourcing that partially circumvents the controversial issues of compensation at public pensions, is the chief investment officer of the San Diego County Employees Retirement Associate (SDCERA), a fund renowned for, among other things, its transparency. The tautological problem with transparency, of course, is transparency—a fact Partridge recently discovered when an attempt to outsource SDCERA’s investment staff to Partridge’s Integrity Capital via a no-bid process was met with a barrage of criticism. The fund’s lawyers quickly nixed the plan, and Partridge was left with the ability to guide SDCERA’s investments without, in fact, directly guiding its investment team.

To read the rest of the magazine article, click here.

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