Canada Life Investments has embarked on a quest to spread the word on ‘risk-parity’ investing to drum up interest for its latest offering.
The CF Canlife Strategic Return fund was launched on June 30 as a global multi-asset portfolio aiming to achieve a return of one-month Libor plus 5 per cent.
The vehicle is managed by a multi-asset team led by Edward Qian at PanAgora Asset Management, a sister company of Canada Life Investments.
While the philosophy behind risk-parity investing has been around for a long time, the phrase was actually coined by Mr Qian, chief investment officer and head of multi-asset research at PanAgora, in 2005.
It describes the investment school of thought which focuses on allocation of risk rather than capital.
Risk-parity investing aims to equal-weight its risk across asset classes by dividing volatility and risk across the portfolio.
Mr Qian explains: “We blend different asset classes in such a way that the risks they represent are balanced throughout the portfolio. Decisions are based on the allocation of risk, rather than the allocation of capital, as is the case in a traditional portfolio.
The fund runs around 80 holdings almost wholly invested through derivatives.
It currently has high levels of UK and US government debt, as well as cash. The risk weightings in the fund are 40 per cent in both equities and bonds, with the remaining 20 per cent in a basket of commodities.
