SPY - Ray Dalio's Way Loses Shine As Investors Yank Out Billions From Risk-Parity Funds After Disappointing Returns: But Is It A 'Classic Investment Error?' | Benzinga
A popular asset allocation strategy promoted by hedge funds, including Bridgewater Associates‘ Ray Dalio, is reportedly facing investor redemptions after underperforming promises.
What Happened: Bridgewater and other hedge funds promised superior returns with their “risk-parity portfolios,” but after half a decade of subpar performance, investors are pulling their money out, Bloomberg reported.
Large investors, including public pension funds in New Mexico, Oregon, and Ohio, have withdrawn their investments, leading to a $70 billion decline in these funds from their peak three years ago. This comes despite reassurances from hedge funds that things could improve in the next decade.
Risk parity was successful only during the Great Financial Crisis of 2008-09 and “that was really its heyday,” said Eileen Neill, as per the report, whose firm advises New Mexico’s $17 billion worth of public employee pension.
Since 2019, risk-parity funds have consistently underperformed the standard 60/40 global stock-bond mix, according to a broad industry index, as per the report. This lackluster performance has led to a significant investor exodus, with Verus estimates compiled from eVestment data showing a drop in risk-parity fund assets from a peak of $160 billion ...