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2015 Risk Parity Investment Survey

Industry Trends





Risk parity users by asset owner type




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    2015 2014 CHANGE
Corporate pension fund 37% 26% 44%
Public pension/sovereign wealth 17% 27% -36%
Endowment/foundation 10% 15% -31%
Other 35% 32% 9%












Risk parity users by asset size




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    2015 2014 CHANGE
Less than $500 million 2% 17% -86%
$500 million – $1 billion 3% 6% -43%
$1 billion – $5 billion 24% 15% 61%
$5 billion – $15 billion 23% 18% 28%
More than $15 billion 47% 44% 6%












Risk parity users by location




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    2015 2014 CHANGE
United States 74% 79% -6%
Canada 4% 0% n/a
Europe 18% 18% -2%
Other 5% 3% 57%












In what ways do you consider using risk parity?






  2015 2014 CHANGE
As a standalone risk parity allocation 53% 65% -19%
As an asset allocation “pilot program” 20% 20% -3%
In “innovation” or “alternatives” portfolios 33% 31% 7%
As an allocation to real assets 9% 12% -25%
As a GTAA or GAA strategy 20% 14% 38%
As an equity substitute 17% 18% -7%
As a funding vehicle for private equity strategies 4% 8% -52%
As a cash overlay 9% 4% 125%
As a core component of the total asset allocation 38% 55% -31%
As part of custom target-date fund in a DC plan 22% 27% -16%
As a standalone option in a DC plan 8% 20% -61%












What are your risk parity allocation plans for the next



12 months?




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    2015 2014 CHANGE
Increase 19% 27% -30%
Maintain 66% 67% -2%
Reduce 16% 6% 146%












What percentage of your portfolio is allocated to risk parity?









ALL RESPONDENTS




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    2015 2014 CHANGE
<5% 66% 49% -5%
5% – 10% 15% 27% -44%
10% – 25% 8% 14% -43%
>25% 11% 10% 6%












< $1 BILLION




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    2015 2014 CHANGE
<5% 100% 50% 100%
5% – 10% 0% 13% -100%
10% – 25% 0% 13% -100%
>25% 0% 25% -100%












$1 BILLION – $5 BILLION




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    2015 2014 CHANGE
<5% 53% 43% 24%
5% – 10% 20% 29% -30%
10% – 25% 7% 14% -53%
>25% 20% 14% 40%












> $5 BILLION




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    2015 2014 CHANGE
<5% 65% 50% 31%
5% – 10% 16% 29% -44%
10% – 25% 8% 15% -44%
>25% 10% 6% 73%















How do you bucket your risk parity strategy?






ALL RESPONDENTS






  2015 2014 CHANGE
Equities 17% 23% -26%
Fixed income 7% 10% -35%
Alternatives 32% 27% 19%
Real assets 7% 6% 9%
Dedicated* 45% 59% -24%
Other 17% 12% 37%






< $1 BILLION






  2015 2014 CHANGE
Equities 50% 75% -33%
Fixed income 50% 38% 33%
Alternatives 0% 25% -100%
Real assets 0% 25% -100%
Dedicated* 50% 13% 300%
Other 0% 13% -100%






$1 BILLION – $5 BILLION






  2015 2014 CHANGE
Equities 21% 0% n/a
Fixed income 7% 0% n/a
Alternatives 36% 14% 150%
Real assets 14% 0% n/a
Dedicated* 43% 71% -40%
Other 7% 14% -50%






> $5 BILLION






  2015 2014 CHANGE
Equities 14% 15% -7%
Fixed income 5% 6% -23%
Alternatives 32% 29% 8%
Real assets 5% 3% 57%
Dedicated* 45% 68% -33%
Other 20% 12% 73%




*Dedicated risk parity/multi-asset bucket 









Out of which bucket(s) do you fund risk parity?






ALL RESPONDENTS






  2015 2014 CHANGE
Equities 53% 59% -10%
Fixed income 21% 20% 1%
Alternatives 19% 25% -23%
Real assets 2% 10% -83%
Dedicated* 24% 18% 31%
Other 16% 12% 27%






< $1 BILLION






  2015 2014 CHANGE
Equities 100% 63% 60%
Fixed income 50% 13% 300%
Alternatives 0% 25% -100%
Real assets 0% 0% n/a
Dedicated* 0% 13% -100%
Other 0% 0% n/a






$1 BILLION – $5 BILLION






  2015 2014 CHANGE
Equities 64% 57% 13%
Fixed income 14% 29% -50%
Alternatives 21% 14% 50%
Real assets 0% 0% n/a
Dedicated* 14% 0% n/a
Other 14% 14% 0%






> $5 BILLION






  2015 2014 CHANGE
Equities 48% 59% -19%
Fixed income 21% 21% 4%
Alternatives 19% 27% -28%
Real assets 2% 15% -84%
Dedicated* 29% 24% 22%
Other 17% 15% 13%




*Dedicated risk parity/multi-asset bucket 









How do you benchmark risk parity strategies?




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How many risk parity vendors do you use?









ALL RESPONDENTS




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One 45%
Two 24%
Three 22%
Four 4%
Five 4%
> Five 2%
Average 2.2












< $1 BILLION




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One 100%
Two 0%
Three 0%
Four 0%
Five 0%
> Five 0%
Average 1.0












$1 BILLION – $5 BILLION




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One 58%
Two 8%
Three 25%
Four 8%
Five 0%
> Five 0%
Average 1.8












> $5 BILLION




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One 38%
Two 30%
Three 22%
Four 3%
Five 5%
> Five 3%
Average 2.1















Risk parity clients: average satisfaction levels with vendors






  (1=low; 5=high)
Client service 4.38
Overall offering 4.03
Level of transparency for implementation/portfolio construction 3.81
Product performance since inception 3.65
Level of transparency for portfolio holdings 3.44
Product performance past year 3.17












How concerned are you about the following issues, if at all?






  NOT AT ALL A LITTLE MODERATELY QUITE EXTREMELY
The use of leverage/



counterparty risk
13% 24% 33% 19% 11%
Performance 13% 23% 23% 21% 21%
Peer risk 42% 20% 25% 12% 0%
Assets without a risk



premium/prohibited



by IPS
41% 17% 24% 14% 5%
Board and



staff education
22% 25% 24% 17% 12%
No explicit bucket



to put it in
62% 15% 13% 7% 3%
Not enough viable



manager offerings
47% 18% 22% 12% 2%
The passive approach



some vendors take
50% 18% 13% 13% 5%
Dynamic asset allocation



policy is preferable
36% 19% 25% 12% 8%
Timing 27% 13% 30% 17% 13%
Transparency 19% 20% 31% 20% 10%
How to benchmark 28% 20% 27% 20% 5%












Non-users: What concerns have led you to not allocate or not consider an allocation towards risk parity strategies?






   
The use of leverage/counterparty risk 42%
Board and staff education 34%
Performance 22%
Dynamic asset allocation policy is preferable 22%
Timing (i.e. implementing a portfolio today given the valuation of bonds) 20%
No explicit “bucket” to put it in 19%
Assets without a risk premium/prohibited by IPS 15%
Benchmarking 15%
Transparency 12%
The passive approach some vendors take 7%
Peer risk 6%
Not enough viable manager offerings 4%
Other 26%