HFR Risk Parity Index™ Methodology
The HFR Risk Parity Indices™ are a series of benchmarks designed to reflect the performance of the universe of managers that employ a portfolio allocation strategy based on targeting risk levels across the various components of an investment portfolio.
Risk Parity is an approach to investment portfolio management which focuses on allocation of risk, usually defined as volatility, rather than allocation of capital. Risk Parity funds are classified into 3 main volatility targets: 10%, 12% and 15%.
- Funds with a volatility target of 10% or less are classified as Volatility Target: 10%.
- Funds with a volatility target of >10% and <15% are classified as Volatility Target: 12%.
- Funds with a volatility target of greater than or equal to 15% and less than 20% are classified as Volatility Target: 15%.
The HFR Risk Parity Institutional Indices represent the performance of the largest managers in the risk parity fund industry. These funds must have assets under management of USD $500MM or greater at time of inclusion in the index.
HFR Risk Parity Indices are rebalanced on an annual basis on the first business day of the year. At the time of rebalance all index constituents will be equally weighted.
Evaluation Criteria for inclusion in the HFR Risk Parity Indices are:
- Report monthly returns
- Report net of all fees returns
- Report assets in USD
HFR Risk Parity Index methodology was last updated effective July 1, 2021. Please review the published Defined Formulaic Methodology pdf document on this page for details.
Recent Correction Notices
NOTICE: On January 13, 2022 HFR restated performance for the HFR Risk Parity Vol 12 Indices. Details here
NOTICE: On November 4, 2021 HFR restated performance for several HFR Indices. Details here